Nokia Lowers Forecasts Amid iPhone Competition

0
800

Nokia Oyj, the world‘s biggest maker of mobile phones, cut its outlook for sales and margins, hurt by competition in high-end phones from Apple Incorporated‘s iPhone and devices based on Google Incorporated‘s Android software.

   According to Bloomberg News on Wednesday, the second-quarter handset revenue and margins will be “at the lower end of or slightly below” its previous range of forecasts, the Espoo, Finland-based company said in a statement, also citing a weaker euro. Nokia also cut its outlook for the full year.

   “This does not help in restoring investor confidence and credibility of the management,” Sami Sarkamies, an analyst at Nordea Bank, wrote in a note to clients. “Chosen strategy and more importantly its implementation will be questioned.

   “Nokia Chief Executive Officer, Mr. Olli-Pekka Kallasvuo, has struggled to deliver on a touchscreen model that meets user expectations raised by the iPhone. The N8, Nokia‘s newest touchscreen smartphone, is set scheduled to be released in the third quarter. The device has been too slow in the making and may still disappoint, analysts have said.

    Nokia fell by as much as 91 cents, or 11 per cent, to 7.02 euros, the most in more than a month. It was trading down 8.5 per cent at 7.26 euros in Helsinki.

  The company is losing high-end, high-margin customers to the iPhone, Research In Motion Limited‘s BlackBerry, and phones running Google‘s Android software, while increasing sales of cheaper smartphones with smaller profits.

   Sales in the devices and services division may fall below $8.2bn in the second quarter as the company‘s product mix shifted toward less-profitable midrange and low end phones, Nokia said.

   “Somehow they‘ve lost the sense of understanding where the market is going,” said Bengt Nordstrom, a telecommunications analyst at Northstream AB in Stockholm. “There was a time when Nokia dictated for the industry how a mobile phone should look and function. It‘s not for them to decide alone anymore what customers want – they have strong competition from other players particularly from Apple.

   “The adjusted operating margin in handsets may fall below nine per cent in the second quarter and 11 per cent for the year, it said. The company lowered its devices margins forecasts on April 22 to between nine and 12 per cent for the quarter and between 11 and 13 per cent for the year.

    Sales are also being hit by the weaker euro, the company said. The 16-nation currency has weakened 14 per cent this year against the dollar.