Growth versus cash

23 January 2003

Falling handset prices have killed Nokia s growth story. But the Finnish group is generating an awesome cash pile. Nokia will prop up its stock by spending cash on a share buyback. But shareholders might prefer a special dividend.

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Nokia, the world's leading mobile phone manufacturer, reported proforma earnings of E0.26 per diluted share in the fourth quarter. The consensus EPS estimate was E0.23.

However, the EPS number was inflated by an E87m investment gain in Nokia's venture unit. That is worth almost two euro cents per share.

Nokia generated a stunning 24.4% profit margin in its mobile handset division on a reported basis. That is despite the average selling price of its units falling to E147 in the fourth quarter, from E152 in the third and E168 in the fourth quarter of 2001.

The company forecast that sales in its handset division would grow on a yearonyear basis by between zero and 9% in the first quarter of this year. For the same period it predicted group proforma EPS of between E0.15 and E0.19.

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