Nokia Lowers Outlook, Shares Slump
Nokia Corp. (NYSE: NOK) on Tuesday lowered its sales and margin outlook for the second quarter of 2011 and the news sent its shares tumbling 14 percent.
The Finnish phone maker said that net sales for its devices and services business in the second quarter would be "substantially below" the previously stated range of €6.1 billion (US$8.8 billion) to €6.6 billion ($9.5 billion), due to lower average selling prices (ASPs) and lower device volumes.
The company also lowered its outlook for devices and services operating margin in the second quarter from a range of 6 percent to 9 percent to "around breakeven." The drop is due to the lower than expected net sales.
With such an unexpected change in outlook, Nokia said it will no longer provide annual targets for 2011.
Nokia cited several factors that are hitting its business harder than expected in the second quarter, and these include: "the competitive dynamics and market trends across multiple price categories, particularly in China and Europe; a product mix shift towards devices with lower average selling prices and lower gross margins; and pricing tactics by Nokia and certain competitors."
The company reiterated plans to ship the first Nokia product with Microsoft's Windows Phone in the fourth quarter of 2011.
Why this matters
The surprise financial news shows that Nokia's turnaround and its transition from the Symbian to the Windows Phone operating system could be a lot more painful than expected.
CEO Stephen Elop said in a statement, "Strategy transitions are difficult." But, after today's news, the question is: Will this transition get even more difficult? For more
Here's the latest on Nokia's transformation:
- Euronews: Symbian on Life Support (Until 2016)
- Euronews: Nokia's Market Share Shrinking
- Symbian Is Dead. Long Live Windows Phone
- MWC 2011: Microsoft & Nokia Court Carriers
- MWC 2011: How Will Nokia Maintain Market Share?
- MWC 2011: Nokia Guns for Android
- Nokia to Cut Jobs, Stay in Finland
- No Easy Out for Nokia
- Nokia Unveils Major Revamp
— Michelle Donegan, European Editor, Light Reading Mobile