Nokia Rings Up Gains on Improved Subscriber Estimates
By Cindy Christ

If there's one stock you should have paid too much for today, it just might be Nokia (NOK).

On Friday, with the Dow, S&P 500 and Nasdaq all poised to set fresh records, investors were hard-pressed to find a stock worth its salt trading anywhere near reasonable levels.

Enter Nokia. At an analysts meeting Friday in Irving, Texas, the world's No. 1 mobile phone maker raised its already bullish estimate for worldwide growth in wireless subscribers.

"Based on the fast market growth and our strong position, we believe it will be possible to reach net sales growth of 30 to 40 percent in 2000, which would exceed our long-term target of 25 to 35 percent," said Nokia chairman and CEO Jorma Ollila, in a statement. "We continue to believe that the long-term growth target is achievable in 2001 and 2002."

Estimating more than 450 million subscribers worldwide by yearend, the company said it expects that number to mushroom to one billion by the end of 2002, a year sooner than projected.

Lower costs for mobile phones and improved quality of digital services are what's behind better-than-expected growth in cellular use. But down the road, Nokia is preparing to create demand for a new generation of portable web access devices and mobile data services made possible by the emergence of the wireless Internet.

"In mobile phones Nokia sees new product segments emerging through convergence of the Internet, multimedia, applications and connectivity," the company's statement said.

The company also is taking aim beyond consumers. To tap growing corporate demand, a division of the Finnish company called Nokia Internet Communications has been buying up web and wireless companies to target Internet Service Providers and business users.

A statement by networking leader Cisco Systems (CSCO) reported by Reuters Friday fueled the flame under Nokia shares. The news service reported that Cisco's northern European head Theo Wegbrans said he would like to form alliances with telecom equipment makers Nokia and Ericsson.

Nokia shares shot up on the news, closing up $17.38, or 12 percent, to $162.

According to Hoover's Online, Nokia derives 80 percent of its handset revenues from fast-growing sales of digital cell phones. Its products fall into three divisions: networks (systems and infrastructure products for wireless, fixed -access and Internet protocol networks), digital and analog cellular phones, and other operations (PC and workstation monitors, multimedia digital satellite and cable network systems, and TV set-top boxes).

Nokia also offers phones with Internet access using wireless application protocol (WAP).

With orders for more than three million lines, Nokia says it's positioned to become a market leader in high-speed wireline Internet access using Digital Subscriber Line (DSL) technology.

After the announcement, Donaldson Lufkin & Jenrette raised its price target Friday on Nokia to 170 euros from 150 euros and reiterated its "top pick" stock rating.

DLJ also increased profit estimates for the company to 2.75 euros from 2.54 euros for fiscal year 2000. For 2001 and 2002, the broker raised earnings per share estimates to 3.40 euros from 3.08 and to 4.30 euros from 3.91.

According to Zacks, consensus earnings estimates for Nokia for 1999 and 2000 are $2.19 and $2.66.

For the quarter ending Dec. 31, consensus forecasts have the company earning $0.65 per share. Analysts say Friday's announcement will have a greater earnings impact in 2000.

Although component shortages have plagued handset makers this year, in a recent conference call Ollila told analysts that the company has secured enough supplies to meet demand in the fourth quarter and that supplies for 2000 look even better.

"The company continues to dominate the handset market which we expect to grow at an annual rate of more than 40 percent for the next several years," said Hambrecht & Quist analysts.

In the most recent quarter, Nokia exceeded earnings estimates on strong handset sales. For the nine months ended Sept. 30, sales rose 49 percent to 13.4 billion euro. Net income rose 57 percent to 1.72 billion euro.

"On the passing of another quarterly earnings release, we see further evidence that Nokia remains one of the best-placed companies to exploit the rapid growth in wireless," said Credit Suisse First Boston in an October research note.

In 1998, Nokia sales were $15 billion, up 60.3 percent year -over-year. Net income was $2.04 billion, a 77 percent increase from the prior year.

Analysts say that the big winners in the growth of the wireless web will be handset makers and their component suppliers.

Nokia rivals also advanced Friday on improved expectations for the whole sector.
Motorola (MOT) finished up $5.44, or 4.59 percent, at $124. Sweden-based Ericsson (ERICY) gained $3.44, or 6.7 percent, to close at $55.

Wireless component suppliers weren't left out of the rally. Recovering some of its 10 percent drop from Thursday, RF Micro Devices (RFMD), which earns more than half of its revenue from Nokia, added $2.06, or 3.3 percent, to finish at $64.63.

Alpha Industries (AHAA) advanced $1.69, or 2.8 percent, to $61.88. TriQuint Semiconductor (TQNT), which announced a 2 -for-1 stock split Thursday, rose $0.50, or 0.57 percent, to $87.75. Anadigics (ANAD) jumped $0.88, or 1.9 percent, to $46.88.

Rumors were circulating this week that a Nokia stock split announcement is imminent. Although a split would put icing on the cake, a company with Nokia's long-term prospects looks sweet any way you cut it.