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Nokia, Philips May Show Resilience as Consumer Confidence Dives

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By Marcel van de Hoef and Juho Erkheikki

Oct. 10 (Bloomberg) -- Matias Bjoerklund, a27-year-oldFinn,plansto buy a television regardless of dailyheadlines abouttheglobalfinancial meltdown.

``My personal finances are good and at least fornowtheglobalsituation hasn't affected me,'' Bjoerklund, whoworksatHelsinkiUniversity, said outside Stockmann, thebiggestdepartmentstore inthe Finnish capital.

NokiaOyj, the world's biggest maker of mobile phones, andRoyalPhilips Electronics NV, Europe's largest maker ofconsumerelectronics including TVs, may so far have withstood theslide inconsumer confidence, based on estimates for third-quartersales andearnings to be released next week. While consumerconfidence inEurope fell to a 14-year low in July, makers ofmobile-phones andTVs may be more concerned about falling prices,analysts say.

``For most people at this stage the financialcrisisissomethingthey hear about in the news,'' said NicolasvonStackelberg, an analyst at Sal. Oppenheim Jr. &CieinFrankfurt, who covers Nokia. ``It's not somethingthatreallyaffects them at this point.''

European retail sales declined in August astheregion'seconomyextended its slump and the globalfinancialcrisisintensified,undermining consumer confidence. SomeanalystssurveyedbyBloomberg News say lower confidence mayeventually hurtsalesofelectronics such as mobile phones andtelevisions.

``All that bad news that's coming from everywhere, it'sgottohavean impact at some stage,'' said Neil Mawston, a researchdirector atStrategy Analytics Inc.

`Relatively Robust'

TVs and mobile phones this year account forabouthalfofelectronics sales in Europe, according to researcherCEA/GfK.

``Feedback from the channel is thatdemandremainsrelativelyrobust,'' said Ben Wood, research directoratLondon- based CSS Insight, whichtracks the mobile-phoneindustry.Wood anticipates there may be ashift toward cheaper andmoreexpensive phones if consumerconfidence deteriorates further.

Nokia,based in Espoo, Finland, may say on Oct. 16 net incomefell28percent to 1.12 billion euros ($1.53 billion), theaverageestimateof 13 analysts surveyed by Bloomberg. Sales mayhavedeclined lessthan 1 percent to 12.8 billion euros, mainly hurtbythe weakerU.S. dollar and lower average selling prices.

A Nokia device will sell for 75 euros on averagethisyear,43percent lower than in 2003, according to Citibankestimates.

``The mobile phone is more recession resistantthanotherconsumerelectronics,'' Mawston said. ``Many peopleregardtheirmobile phoneas the most important thing they have.''

Nokia has lost 56 percent in Helsinki trading thisyearonconcernslowing economies will hurt handset replacementsalesinmaturemarkets such as Europe. Nokia also ceded marketshareinadvanceddevices to Research InMotion Ltd.'s BlackBerry.

Prioritizing Televisions

Philips,also the world's largest maker of patient-monitoringsystems andlight bulbs, will probably say on Oct. 13third-quarterprofit rose6.3 percent to 352 million euros, helped bya gain fromsellingshares in Taiwan Semiconductor Manufacturing Co.Thecompany's TVsales rose 8 percent to 1.36 billion euros inthesecond quarter.

``For most people a TV is slightly below water,electricityandatelephone in order of importance,'' said Paul Gray,ananalystatDisplaySearch. ``People who don't feel that richthisyear,maybewon't go on holiday and they may delay changingtheircar,butthey'll still feel rich enough to buy a new TV.''

Western European retail prices excludingvalue-addedtaxfor32-inch flat-panel TVs, the industry benchmark,willdrop17percent to $558 this year, Gray said. Sales willrise2.6percentto 31.9 million TVs in 2008 and to 33.6 millionnextyear,he said.The shipment value will fall to $20.8 billion in2009from$23.2billion this year and $24.1 billion in 2007, asSonyCorp.andSamsungElectronics Co. cut prices to win market share.

Philips has lost 47 percent this year in Amsterdamtrading.

`Bad News'

The European economic outlook continued to deteriorateinthethirdquarter, with manufacturing and servicescontractingandconfidencedropping to a seven-year low. TheInternationalMonetaryFund saidOct. 8 that growth in the 15-nationregionsharing theeuro will slowto 1.3 percent this year from 2.6percentin 2007.Next year, the IMFpredicts 0.2 percent growth.

``This will take time to work throughtheeconomy,''vonStackelberg said. ``Once you see unemploymentratesetching upitwill affect consumer behavior. These effects arestillto come.''

Rabobank Nederland anticipates Europeanhouseholdspendinggrowthwill slow to 1 percent this year from 1.5percent in2007.TheUtrecht-based bank says consumer spending growthmayslowfurthernext year as consumer confidence and stockmarketsslide.

``When consumption is over the top of theeconomiccycle,firstdurable goods will be hit,'' said Niels Visser,a macro-economist at Rabobank.

Most forecasts don't take into account the effectsofthemostrecent events of the credit crisis, such asbankingbailoutsincountries including the U.K., Belgium, IcelandandGermany.

The credit crunch ``hasn't impacted my spending habitsassuch,butit has made me think it might have an effect inthefuture,''saidBjoerklund. ``If your mobile phone breaks, thenyouhave tobuy a newone, but purchases over 200 euros candefinitelybepostponed if theeconomic situation worsens.''

Last Updated: October 10, 2008 19:01 EDT

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