MOUNTAIN VIEW, Calif.--Another quarter of disastrous financial results for Nokia last week, with a quarterly loss of $1.7 billion, has led to the Finnish phone maker’s debt being downgraded to “negative” and even “junk” by major financial consultants.
Both Moody’s and Standard & Poor's pushed Nokia down to “negative status” after the firm announced its revenue was down a significant 30 percent from the same period last year, with spending reaching $2.6 billion in the last six months alone. The Fitch ratings agency went a step further, downgrading Nokia to “junk” status, with a negative outlook for the firm’s future.
Though Nokia CEO Stephen Elop said on the company’s earnings call last week that the firm had “implemented a series of strategic changes and embarked on a major transformation,” those changes don’t seem to have made enough of an impact on investors.
The departure of Nokia's sales chief, Colin Giles, with no planned successor has also played its part to rattle financial commentators.
Nokia only managed to sell 11.9 million smart phones in the first quarter, a figure representing less than half of the 24.9 million smart phone sales the company achieved in the same time period of 2011. Though much of this can be blamed on the phasing out of Symbian handsets, sales of the Nokia Lumia totaled only 2 million in the first quarter, by no means enough to offset the steep decline.
“Nokia’s low end volume business is falling off faster than the firm can build up its high end smartphone business, which is not a good sign,” said analyst Jack Gold, adding that additional competitive pressure was coming from Chinese firms like Huawei, ZTE and Pantech, attacking the low-end.
Gold pointed out that the Lumia was also doing poorly in the UK, a “bad sign” seeing as Europe is a cornerstone market for Nokia.
Despite this, however, Nokia continues to receive support from partner Microsoft in the form of go-to-market and R&D cooperation that, according to Elop, would total $1 billion in 2012 alone.
“I’d say Nokia has at least a couple more quarters where it’s going to be tough going,” said Gold, adding that if WindowsPhone didn’t “kick into high gear” soon, the firm would have an even tougher time surviving. On Tuesday (April 24), the price of Nokia sharesdropped to a 15-year low of 2.654 euros (about $3.50).
Responding to the downgrades and slump in share price, Nokia CFO Timo Ihamuotila told Reuters the company was “quickly taking action,” and would continue to focus in on “lowering the company's cost structure, improving cash flow and maintaining a strong financial position."
@Frank Eory I agree with your observation that "low end market is declining faster than expected". One of the major reasons why low end market is collapsing is because cost of smartphone is almost comparable to the low-end phones.
@rick.merritt, I agree with you. Its pretty early to say that its end of Nokia. Nokia has pretty good chance of bouncing back if they provide good features with Window's OS. Let's not forget samsung is planning for its own OS which might give Nokia chance to grab the market.
The Symbian platform (Nokia Belle) is currently on par with Android in terms of features and performance, but Nokia does not support it with adequate marketing. See the example of the pluri-awarded 808 PureView: They have a winner and ignore it to keep marketing Lumia, the biggest failure in the history of mobile communications.
the implication of this is old folk in this bussiness is 'Junk'.
Nokia is made of group of folks who was once brilliant and trendy.
well, in a industry twists so fast they all seems like 100 years old and junk.
this was totally expected.
in a market where being late by a quarter is unfathomable, Nokia is a good 3 years late.
Now, the asians have a firm grip on the low and high end phone subsystem. Whether it is design, software or supply chain, they have established themselves as the leading powers.
the only western power to survive is apple (soley due to the Steve Jobs).
With Mot, Blackberry, Nokia, Sony, the Japanese all biting dust, a new world paradigm is beign established with Samsung as the leader.
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.