Nokia Oyj, the world’s largest maker of mobile phones, said industrywide handset sales would be lower than it anticipated this year and would force the company to deepen cost cuts.
The industry is likely to ship about 1.24 billion devices around the world this year, rather than 1.26 billion, Nokia said in a statement on Friday that also predicted a decline next year. The Espoo, Finland-based company still aims to keep or “slightly” increase its market share this quarter from the preceding three months.
Nokia said in the last few weeks the global economic slowdown and currency volatility caused a “sharp” slide in consumer spending, which may lead to the first industry contraction since 2001. The revision marks the second time in 10 weeks Nokia has revised targets.
“Consumers, because of the rising jobless rates and difficulty obtaining credit, are closing their wallets,” said Choi Wing-Yen, an analyst at Theodoor Gilissen Bankiers who recommends buying Nokia’s stock. “The result is that the car industry is foundering, televisions aren’t sold anymore, personal computers are slowing — and now also handsets.”
Nokia’s market share is bigger than the combined totals of its three closest competitors because it supplies models ranging from cheap entry-level phones to high-end devices with Internet access, navigation and media players.
Nokia said it would take “decisive action to significantly reduce” costs, in addition to already announced measures.
Last Tuesday, the company said it may cut as many as about 600 jobs in marketing and research to improve efficiency. It employed 123,000 people on Sept. 30.
“You have to be absolutely brutal about prioritizing what you’re continuing to do, and what would be nice to do but not necessary,” chief financial officer Rick Simonson said on a call. “Smaller initiatives may have to wait or get cut.”
Nokia said the credit crunch has limited the purchasing power of some trade customers.
Simonson said the slowdown has been most pronounced in developed markets such as Western Europe, while emerging economies are faring better.
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