April 20, 2024

Nokia Abandons 2011 Profit Goal

PARIS — Nokia, the cellphone giant battling to maintain its position in the face of competition from the iPhone and Android, said Tuesday that it was abandoning its 2011 profit targets after an unexpectedly poor second-quarter showing.

Shares in Nokia tumbled 17.5 percent, closing at €4.75 in Helsinki, after the company, which is based in Espoo, Finland, said “multiple factors are negatively impacting” sales, particularly lower selling prices and a reduced sales volume.

“The fact that things are getting worse is not a surprise,” said Stuart Jeffrey, an analyst at Nomura International in New York. “But the scale of the decline is surprising, coming just six weeks after they offered guidance.”

Facing an erosion in sales of phones using its Symbian technology, Nokia in February formed an alliance to use Microsoft’s Windows Phone 7 operating system in new models. The company said Tuesday it had “increased confidence” that the first Nokia-Microsoft phone would be shipped in the fourth quarter.

Nokia said it was still investing in the Symbian lineup and intensifying its focus on point-of-sales marketing.

“The Symbian portfolio is in terminal decline,” Mr. Jeffrey said, “so the importance of the Windows phone is even greater now.”

He added that the weakness of the Symbian model appeared to vindicate the wisdom of the switch to the Microsoft platform, though it might have been better to at least add a few models using the Android operating system created by Google to benefit from its growth.

Nokia lowered its forecast for second-quarter sales in its devices and services business to “substantially below” the range of €6.1 billion to €6.6 billion, or $8.8 billion to $9.5 billion, it had previously forecast.

“Given the unexpected change in our outlook for the second quarter, Nokia believes it is no longer appropriate to provide annual targets for 2011,” it said.

A world-beater just a few years ago, Nokia remains the world’s largest cellphone maker by unit sales. But it has fallen behind Apple, maker of the iPhone, to the No.2 position when measured by revenue generated in the mobile phone market.

The phenomenal success of the iPhone and devices using Android, Google’s operating system, have left Nokia scrambling for market share in high-end smartphones, at the same time that Samsung of South Korea and its Chinese rivals have carved out major territory in the market for less expensive phones. In April, Nokia said it would cut costs nearly 20 percent over three years, a goal that is likely to result in thousands of layoffs.

“It’s very difficult to have a strong feeling about the outlook for Nokia in 2012 and beyond,” Mr. Jeffrey said, “because it’s all contingent on the success of the Windows phone.”

Article source: http://feeds.nytimes.com/click.phdo?i=b4a14c1705f0bc24be1f46b5e44582ac

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