Nokia issues warning on results as sales plummet

Europe's largest handset maker, Finnish giant Nokia, issued a results warning on Tuesday after its phone sales didn't make it up to scratch.

The company announced that it would miss its targets for the quarter, with a two per cent decline in sales compared to the corresponding quarter in 2003. Nokia had predicted growth of more than three per cent.

Nokia estimates that volume growth of phones was 25 per cent worldwide in the first quarter of 2004, while its own volume growth was nearer to 19 per cent.

Nokia put the drop in handset sales in Europe and Asia down to a shortfall in the number of handsets, an overemphasis on producing low-end phones and a gap in their product range targeted at the middle of the market.

Nokia's CEO, Jorma Ollila, took a pragmatic view of the situation, saying that he expected results to level out soon and adding that he was pleased with the company's overall profitability.

"Obviously, we are not satisfied with our sales development during the first quarter... The overall Nokia sales were negatively impacted because we were not able to fully exploit the usual seasonal market pick up in March and the mobile phones product mix was weighted towards the low end. Although we are already starting to see the long-term benefits of the new organisation, in the short term its implementation slightly slowed down our reactions and operational effectiveness."

Nokia has said that it will keeping churning out new handsets - with 40 new additions to the stable planned for 2004. "We believe that during the year we will see improvement as we bring new products to market," Ollila added.

While Ollila might be happy with the way things are going, the markets weren't best pleased. In Nokia's home country of Finland, shares plummeted, wiping billions of euros off the value of the company.

And it gets worse for the handset manufacturer. A suit has been filed against the company in the US, accusing it of securities fraud over statements it made about its first quarter results.

Nokia refuted the allegations and said it would "defend itself against the complaint vigorously".