SAN FRANCISCO—Cellular handset vendor Nokia Corp. said Tuesday (May 31) it now expects net sales from devices and services to be substantially below its previously expected second quarter range of between 6.1 billion euro ($8.8 billion) and 6.6 billion euro ($9.5 billion).
Nokia (Espoo, Finland) blamed the anticipated shortfall on 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.
Nokia, which previously said it expected third quarter sales to be roughly flat compared to the second quarter and that it expected a seasonal pick up in sales in the fourth quarter, said Tuesday that those targets were no longer valid. "Given the unexpected change in our outlook for the second quarter, Nokia believes it is no longer appropriate to provide annual targets for 2011," the company said through a statement.
"Nokia’s loss of ground in the smartphone market has been well documented, but this performance indicates that it’s also now struggling in the low-end, low-cost market where the company had been particularly strong," said Kevin Burden a vice president and practice director at market research firm ABI Research.
Burden said Nokia had expected its low-end models to continue performing well in developing markets and to help the firm through its transitions in software platforms as well as leadership. "This news indicates that pressure is intensifying at both ends of the market, and Nokia can no longer count on any of its product lines to be a bridge from its industry-leading past to what it hopes would be a competitive future," Burden said.
Burden said the Nokia announcement also intensifies doubts about whether Nokia will be able to deliver handsets running Microsoft's Windows Phone OS in 2012 that are superior to competitors' offerings.
"Key to Nokia’s strategy is its belief that, with its initial line of Windows phones, it can vault ahead of competitors that are currently building Windows-powered phones," Burden. "The turmoil within Nokia—started by the changes in management, intensified by the shifts in strategy, and now boiling over into weak market performance—is cementing doubts that Nokia can pull it off."
Nokia said Tuesday it remains pleased with its progress on its Windows Phone strategy. The company said it has increased confidence that the first Nokia product with Windows Phone will ship in the fourth quarter 2011.
Nokia said it also remains committed to its target to reduce its pro forma Devices and Services operating expenses by 1 billion euro ($1.4 billion) for the full year 2013, compared to the full year 2010. The company said it plans to implement these reductions as quickly and effectively as possible.
"Strategy transitions are difficult," said Stephen Elop, president and CEO of Nokia. "We recognize the need to deliver great mobile products, and therefore we must accelerate the pace of our transition. Our teams are aligned, and we have increased confidence that we will ship our first Nokia product with Windows Phone in the fourth quarter 2011."
It seems to me that Nokia missed the Android boat, then choose Windows as a way to differentiate from the many companies that are making Android smartphones. Plus, I Nokia has said that it got billions of dollars from Microsoft for going with Windows. For the past few weeks there has been a persistent rumor--and I stress that this is a rumor--that Microsoft will acquire Nokia.
Just fail to understand, why Nokia didn't opt for Android. It could have made them top selling mobile company because, in hardward features nobody can beat Nokia. I still hope Nokia adopts Android just to stay in the race.
It sounds like Nokia needs a second prong in their strategy shift -- not only the Windows smartphone strategy, but also a very aggressive cost-cutting on their lower end models, which are the ones that pay the bills.
Missing the sales forecast is really a bad news in altready bad year for Nokia. She is loosing market shares yoy basis and people are not happy the way Nokia-Windows partnership happened. Focus should be on increasing the market shares rather than cutting cost to look good.
though i agree that Window-Nokia combination is going to be good for both but the worry here is that Nokia is losing ground in the low and mid end segments which are the stronghold of Nokia. Smartphone segment's performance should not affect these segments.
The smartphone market is fickle and therefore hard to predict. They are such a fashion statement for the young crowd, a crow of an age not known for independent thinking. Apple is the fashion du jour, so Android, and now Windows, have a tough row to hoe.
I agree that Nokia had to find a partner with lots of clout. It's just that in the small portable device market, the fashion statement that people feel compelled to make has an Apple emblem on it. For the time being. I certainly agree that in the middle of the switchover, Nokia will be especially vulnerable.
Well, they've basically announced that all their present smartphones are going to basically be obsolete, so you'd expect the sales of these products to plummet.
Can they avoid the Osborne affect and get Windows phones out in time to survive the freefall?
(Osborne made computers before the PC clones existed. Adam Osborne announced that PC clones were the future and that his company was working on them. The sales of their previous product plummeted, and they didn't have enough money to finish their clones, so the company went under. Some people dispute this history, but it is how I remember it).
Join our online Radio Show on Friday 11th July starting at 2:00pm Eastern, when EETimes editor of all things fun and interesting, Max Maxfield, and embedded systems expert, Jack Ganssle, will debate as to just what is, and is not, and embedded system.