Nokia lowers outlook, see share price plummet

May 31, 2011

, HELSINKI, May 31 – The world\’s top mobile phone maker Nokia on Tuesday downgraded its second quarter outlook, saying sales would be far lower than expected and that it could no longer provide a full-year forecast.

"Nokia now expects Devices and Services net sales to be substantially below its previously expected range of 6.1 billion to 6.6 billion euros ($8.6-9.5 billion dollars) for the second quarter 2011," the company said in a statement, citing lower than expected selling prices and volumes.

After issuing the warning, Nokia saw its share price plummet 13.1 percent at 1230 GMT to 5.00 euros a share on a Helsinki stock exchange down just 0.14 percent. Shares in mobile phone giant thus reached a new lowest level since 1998.

Nokia said that the sudden change in second-quarter expectations also negated its predictions for full-year sales.

The company had previously said it expected handset sales to remain at the same level in the third quarter as the second quarter, with a seasonal upswing in the fourth quarter.

"These targets are no longer valid," Nokia said, adding that it would no longer provide annual targets for 2011, and would only give short-term quarterly guidance in its interim reports "when circumstances allow it to do so."

Although it remains the world leader, Nokia has in recent years seen a dramatic drop in its global market share amid heightened competition in the high-end smartphone market.

In February, the company announced a strategic shake-up, including phasing out use of its smartphone platform Symbian in favour of a tie-in with the Microsoft Phone platform, and warned the transition would cause turbulence.

Nokia chief executive Stephen Elop said in a conference call soon after Tuesday\’s announcement that the sales forecast revision was promted by heightened competition in China and Europe.

"We\’re seeing large number of Android handsets on the market… There is definite pricing pressure going on. We are understandably under pressure as to what\’s the right pricing point (for our Symbian phones)," he said.

He said the focus now was on bringing out the first Nokia Windows mobile phones in the fourth quarter of 2011.

"There\’s work still ahead, there\’s bugs and everything you would expect in this point in the development cycle,… but we\’re feeling good about the progress," he said.

Nokia\’s first quarter net profit fell 1.4 percent to 344 million euros ($503 million), while it said its market share fell to 29 percent from 33 percent in the first quarter of 2010, and compared with 40 percent in the first half of 2008.

On Tuesday Elop acknowledged that the company worried "a great deal" about market share, but said this was the time to make "aggressive changes" to streamline the production channel and get new phones from development to shop shelves faster.


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