Monday, May 30, 2011

Nokia Cuts Outlook as Device Sales Fall

Nokia cut its financial guidance for its second quarter and full year 2011 citing substantially weaker sales of mobile devices and services. The company attributed the decline to competitors 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 was unable to predict an annual target for 2011 given the current uncertainty and the major product transition underway.

"Strategy transitions are difficult. We recognize the need to deliver great mobile products, and therefore we must accelerate the pace of our transition," said Stephen Elop, president and CEO of Nokia. "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."

The updated guidance includes:

Nokia now expects Devices & Services net sales to be substantially below its previously expected range of EUR 6.1 billion to EUR 6.6 billion for the second quarter 2011.

Nokia now expects Devices & Services non-IFRS operating margin to be substantially below its previously expected range of 6% to 9% for the second quarter 2011 -- the figure could be around breakeven.

Nokia's previous targets for the third quarter, fourth quarter, and full year 2011 were: 1) Net sales in Devices & Services to be at approximately the same level in the third quarter 2011 as in the second quarter 2011, and seasonally higher in the fourth quarter 2011, compared to the third quarter 2011; 2) Devices & Services non-IFRS operating margin to be between 6% and 9% in 2011. These targets are no longer valid.

Nokia has taken price actions on its current smartphone portfolio, and Nokia is intensifying its focus on retail point-of-sales marketing.

Nokia started shipping its new dual-SIM devices last week.

The company notes continued progress on its Windows Phone strategy, and predicts the first Nokia Windows Phone will ship in the fourth quarter 2011.


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