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After announcing reduced sales estimates, Nokia said colour screens and MMS technology will entice consumers to buy new mobile phones.

Nokia's preliminary outlook for the second half of 2002 is for year-on-year sales growth of around 10 percent, compared with previous expectations for at least 15 percent growth. The world's biggest maker of mobile phones did however maintain its profit target of a pro-forma diluted EPS figure of EUR0.83 for 2002.

But in further disappointing news, Nokia also lowered long-term annual growth targets for 2003 and beyond, estimating growth of around 10 percent over the period, or slightly faster than overall market growth.

The Finnish mobile phone manufacturer is pinning its hopes for a sales recovery on the 30 new phone models scheduled for shipment for 2002. By the end of this year, Nokia expects to have shipped 10 colour-screen models, while approximately half of all Nokia's mobile phone deliveries are planned to be multi-media messaging service (MMS) enabled. In 2003, Nokia expects more than 50 percent of its handset volume shipments to have colour screens.

Indeed a handful of these new models have already been launched by the company, or are soon to launched by the firm, including the 6610, which hits the market in the next three months and comes with MMS, Java application support, an FM radio and colour screen.

"People want phone features that they can use," said Mark Squires, head of corporate communications for Nokia UK and Ireland. "Colour screens will sell because it will allow people to view colour pictures on their mobile phones. This in turn will lead to a surge in demand for MMS, so that people can exchange pictures."

Squires also believes that Java-enabled phones will provide a major upgrade incentive to people who wish to play games on their phones.

"Nokia have good reason to be optimistic about an increase in mobile phone sales in the third and particularly the fourth quarter," said Simon Buckingham, chief executive officer of UK-based mobile communications consulting firm Mobile Streams. "Nokia has managed to maintain profit margins despite the fact that it's operating in a difficult market."

Buckingham believes that there will be two more major upgrade cycles in mobile handsets over the next five years, the first driven by colour screens and MMS and the second driven by the introduction of 3G applications such as camera phones.

"To use an analogy with personal computers, people may be reluctant to upgrade from Windows 98 to Window 2000, because the increase in functionality is incremental and Windows 98 fulfils their requirements. But mobile phones aren't even at the Windows 3.1 stage yet, they're still in the MS-DOS stage of development."

Along with the sales warning Nokia reiterated its earlier forecast for the global mobile handset market to grow modestly to between 400 million and 420 million units this year from last year's 380 million. The firm also repeated its target to achieve a global market share of 40 percent, 5 percent more than the company already has.

© ENN

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