Nokia disappoints with Falling Cellular Phone and Mobile sales

Jorma Ollila, Chairman and CEO commented "Nokia's own first-quarter mobile device volume growth of 19%, slower than the market, reflected that Nokia was not able to fully exploit the usual seasonal market pick up in March. As a result, our sales for the quarter did not meet our expectations and our mobile device market share declined to 35%, based on our preliminary estimate. However, our long-term mobile device market share target remains unchanged at 40%.

Despite Mobile Phones and Multimedia device sales not meeting our expectations, overall we maintained good, solid profitability illustrating the company's ability to manage costs. I am pleased with the strong growth in Networks' sales and the Networks' operating margin of 12.9%, which reflected the positive product mix as well as the full impact of the restructuring measures taken in early 2003. Our new Enterprise Solutions business group is off to a good start with the success of messaging devices, such as the Nokia 6820."

Mobile Phones first-quarter net sales decreased 15% year on year to US$5.16 billion despite higher unit volumes. Volume growth was very strong in Latin America, healthy in China, slower in the rest of Asia and North America, and flat in the Europe/Africa area. Net sales were strong in Latin America and flat in North America, but were more than offset by the decline in the Europe/Africa area and Asia, including China. Net sales in all sales areas, except for North America, were impacted by a product mix more weighted towards the low end. In addition, net sales in Europe and the United States were impacted by gaps in the mid-range of the portfolio.

Multimedia first-quarter net sales increased 60% to US$931 million. The performance of imaging devices, especially the Nokia 6600, was positive; however, Nokia N-Gage sales were disappointing.

Industry volume growth an estimated 29% for first quarter 2004 Mobile device industry volume grew at an estimated 29% year on year and is estimated to have reached 128 million units. Nokia's mobile device volumes grew 19% year on year to reach 44.7 million units, resulting in an estimated market share of 35%. This would represent a 3% decline compared to the first quarter 2003 and a 2% sequential decline based on an updated industry volume estimate of 148 million units in the fourth quarter 2003.

Nokia expects that its mobile device sales and margins should benefit towards the end of the year from the new products launched in 2004. The products, with shipments weighted towards the end of the year, are designed to further enhance Nokia's product portfolio. In addition, Nokia intends to continue to achieve economies of scale in the growing mobile device market. The company also expects the new organizational structure to enable Nokia to better focus on the specific opportunities in the mobile voice, multimedia and enterprise markets.