Nokia lowers profit outlook, shares nosedive

AP News
Posted: Apr 11, 2012 12:38 PM
Nokia lowers profit outlook, shares nosedive

Nokia Corp. saw its share price plummet 15 percent on Wednesday after it warned that heavy competition will hit first-quarter earnings, especially in developing markets, and that it expected no improvement in the second quarter.

The world's largest cellphone maker said multiple factors had hurt sales, particularly in the fast-growing markets of India, the Middle East and Africa and China.

The Finnish company has increasingly been losing out to competitors in the lucrative top-end smartphone sector, against Apple Inc.'s iPhone and brands using Google Inc.'s popular Android software, including Samsung. But it's also been squeezed in the low-end by Asian manufacturers making cheaper phones, such as China's ZTE.

Nokia said operating margins in the first quarter were "approximately negative 3 percent." Previously, it had expected them "around break-even, ranging either above or below by approximately 2 percentage points." It gave no other earnings estimates.

The news spooked investors, who sent Nokia's share price down by more than 15 percent to (EURO)3.23 ($4.24) in Helsinki.

CEO Stephen Elop described the performance as "disappointing" for the company that had pinned hopes on posing a new challenge against chief rivals with new Windows-based Lumia smartphones launched in Europe, the U.S. and China.

"Our devices and services business continues to be in the midst of transition," Elop said. "Within our smart devices business unit, we have established early momentum with Lumia, and we are increasing our investments in Lumia to achieve market success."

On Wednesday, Nokia unveiled a new version of the Lumia 610 which will give customers near field communication technology, or NFC, allowing users with similar technology to exchange data on their handsets and make payments.

Nokia has been the leading handset maker since 1998 but after reaching its global goal of 40 percent market share in 2008, it has gradually lost overall share, plummeting to below 30 percent last year.

In a major strategy shift, it began a partnership with Microsoft Corp. last year, launching its first phone with the Windows operating system in October, aimed at clawing back lost ground. But analysts said it would take several quarters before the company's success could be measured.

Earlier this year, Nokia announced 4,000 job cuts _ on top of 10,000 last year _ and said it will stop assembling cellphones in Europe by 2013 as it shifts production to Asia, where the majority of component suppliers are based, to help it reach markets faster.

Nokia employs some 130,000 people, down from more than 132,000 a year ago.