Nokia disappointed bullish investors on Tuesday by forecasting only a slight improvement in the key business of the world's top cell phone maker, sending its shares lower.Nokia forecast an operating profit margin of around 20 percent for its phones and services over the next one to two years. It has reached a margin of 19 percent so far this year.
"Their new margin targets weren't as good as needed--they're already on those levels," said SEB analyst Leif Pettersson.
But as it seeks to expand into new areas, Nokia said it would next year start to sell phones with free access to music for 12 months--another attack on Apple's iTunes music store.
The Finnish firm, which makes
Samsung Electronics, the world's No. 2 cell phone maker, last week forecast 12 percent growth for the market. Most other forecasters have been more modest with their estimates.
Nokia said it aimed to raise its market share to more than the 39 percent it reached in the last quarter and Chief Executive Olli-Pekka Kallasvuo said the company's long-term target of 40 percent share was not the upper limit.
Nokia dominates
But Nokia's CEO Kallasvuo said he expects large rivals to enter the increasingly attractive ultra-low end of the market.
"Phones that sell for less than 30 euros ($44) are the fastest-growing part of the market," he said.
The Finnish firm raised its group level operating profit target to 16 to 17 percent in one to two years from a previous target of 15 percent. Analysts have forecast an average 15.2 percent margin in 2008 and 15.7 percent in 2009, according to Reuters Estimates.
Nokia said it saw very slight growth in the infrastructure gear market next year, and shares in Sweden's Ericsson fell 4 percent in Stockholm.
Shares in Nokia were 4.2 percent lower at 26.41 euros ($38.56), in early trading on Tuesday. The stock is up around 75 percent so far this year, compared with an almost unchanged DJ Stoxx European technology index, lifted by forecast-beating results and a new growth strategy focusing on mobile Internet services.
Betting on free music
Nokia said it had signed a deal with the world's biggest music group, Universal Music Group, owned by French media giant Vivendi, to offer all of Universal's music free for 12 months to buyers of
At the end of the offer, consumers could keep all the music they have downloaded, the companies said.
Nokia said it was in talks over similar deals with all major labels.
The free access to new music is set to hurt peer-to-peer networking, while Nokia's foray into the digital music retail business will also raise pressure on Apple.
"It seems the record labels have decided to bet on Nokia as a means to add competition to Apple's dominant position in digital music," said Paolo Pescatore, analyst at research firm CCS Insight.
"With Nokia poised to sell well in excess of 120 million phones in this quarter, it's a partner that record labels can't ignore," Pescatore said.
Nokia
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