Nextel, Nokia to Meet Profit Goals

The telecommunications industry got a badly needed dose of good news Tuesday, with two of its biggest players reporting that they are on course to meet profit goals.

Nokia, the world’s largest mobile-telephone maker, warned of lower sales for its second quarter, but the company’s shares gained as investors took heart that Nokia was on course to hit its profit target.

And shares of Nextel Communications Inc. got a boost after the nation’s fifth-biggest wireless provider said it is poised to meet fiscal 2002 financial targets.

Finland-based Nokia told analysts during a much-anticipated mid-quarter update on its finances that sales in its key mobile phone unit would grow by only zero to 4%, less than half the 10% growth it had signaled as recently as April.

But investors cheered because the mobile telephone and network gear supplier reaffirmed that it expects profit margins on handset sales to remain above 20% in the second quarter--among the industry’s highest--and simultaneously gain market share.

“Relative to where most of Wall Street were at, Nokia’s statement was a positive surprise,” said Paul Sagawa, an analyst with institutional brokerage Sanford Bernstein in New York.

Nokia shares initially fell as much as 9% after it warned of lower second-quarter sales, saying they would fall 2% to 6% to $6.5 billion to $6.8 billion, down from a previous target of as much as 7% growth.

But Nokia stock, which has lost half of its value this year, later rebounded to close 5.9% higher in Helsinki trading, recovering off recent share-price lows not seen since late 1998.

Shares of Nokia later gained as much as 10% in New York, but then trimmed its gains somewhat to close only 4.6% higher in U.S. trading.

Nokia is widely held by fund managers in Europe and the United States, although the formerly highflying stock has lost its onetime “must own” status among global investors.

Analysts and professional money managers said Nokia, which makes more than one in three phones sold worldwide, had recovered its momentum after seeing its industry-leading market share dip to 34.7% during the first quarter.

Nextel said earnings before interest, taxes, depreciation and amortization, a measure of cash flow, will be at least $2.5 billion, and the company expects to add about 2 million subscribers from domestic operations.

The Reston, Va.-based company said it is achieving greater operating efficiencies and margin improvement.

If those trends continue, Nextel said, it probably will exceed its 2002 expectations.

Nextel, which is controlled by Craig McCaw, also noted that its average monthly service revenue is tracking ahead of expectations for the quarter.

“Recent strength in monthly revenue, coupled with solid subscriber additions, is driving excellent top-line growth in our business,” said Paul Saleh, Nextel’s executive vice president and chief financial officer.

Earlier this year, Nextel said it expected to generate about $2.5 billion in EBITDA for 2002 and add 2 million subscribers.

Nextel shares gained 63 cents, or 16.6%, to $4.42 on Nasdaq.

Reuters and Dow Jones/Associated Press were used in compiling this report.