Thursday, March 30, 2006

Nokia Raises Forecast For Cellphone Market

The big news so far today is that Nokia "raised its forecast for the global cellphone market this year as developing regions continue to outperform expectations." The company "expects the market to grow by 15% or more in 2006 from the 795 million units it estimates were sold globally last year. The Finnish company previously forecast growth of 10% or more in 2006."

Wall Street Journal reports emerging markets, such as India and China, are fueling demand. Mattias Cullin at Hagstroemer & Qviberg said the new forecast "implies a significantly stronger growth trend in the first quarter than the company and the market previously projected."

Cullin noted "most analysts had predicted the handset market would grow around 11% to 12% in 2006." He added, "The news will lead to increased estimates for Nokia."

With a majority of growth coming from emerging markets, can Nokia increase revenue and average selling prices? Greger Johansson at Redeye said that average selling prices are "usually negatively affected when volumes increase. The news is still marginally positive."

In Reuters, Kulbinder Garcha at Credit Suisse said, "This indicates obviously a very strong start to the year for the handset industry."

In order to take advantage of demand in emerging markets, yhe article mentions that "Nokia also unveiled three new phone models, priced at 45-75 euros excluding taxes and subsidies, and said it expects to sell them all in tens of millions."

Richard Windsor at Nomura Securities said, "It is interesting that the level of interest in these devices will be very low, but their actual importance is really high. These phones are going to be the bulk of their low-end over the next 12-20 months and their functionality is very important."

However with lower cost phones also comes lower average selling prices. eQ Bank analyst Jari Honko said, "It is difficult to estimate how the average selling price of Nokia's phones will develop. Of course these launches will push the price down."