Nokia tanks as profit outlook dims

Nokia tanks as profit outlook dims

FMCG SUPPLIER NEWS

Business Day - Apr 12th 2012, 09:21

The third quarter will see the arrival of Apple’s iPhone 5, bug on new Nokia smartphone with Windows operating system has dashed hopes for a comeback 

Celhphone maker Nokia yesterday warned its phone business would post further losses in the first two quarters, as it reported a software bug in its first smartphone offering with Microsoft.

The news battered Nokia stock — the share price falling up to 19% to €3,10 after news of the losses hit the market. The stock had already shed more than 50% since the firm unveiled the move to Microsoft in February last year.

Earlier yesterday, Nokia also said it had found a software bug in the new Lumia 900 smartphone — its big hope to take on Apple’s iPhone. It was in effect giving the phone away until it is fixed.

Nokia said its phone business, which is launching new products on Microsoft’s Windows Phone operating system to reverse the decline of old lines running Symbian software, would make an operating loss of about 3% of sales in the first quarter, having earlier forecast break-even. It predicted a similar or larger loss in the second quarter, below all 29 analysts’ forecasts gathered by Reuters.

On average, analysts expected a margin of 0,4% for the first quarterand 2,1% for the second.

"It’s a disaster," said Thomas Langer at WestLB.

"Shipments of Symbian devices are declining faster than we anticipated. The ramp up of Lumia devices is not fast enough to compensate for the shortfall."

"Nokia’s challenges have been exacerbated by rampant competition — notably Apple and Samsung, who are extracting a disproportionate amount of margin from the industry at present," said Ben Wood of CCS Insight.

Though still the world’s biggest volume maker of cellphones, Nokia lost the top spot in the lucrative smartphone market last year to Apple and phones running Google’s Android system, in part due to its weak performance in the US, where its smartphones have slipped to less than a 1% market share.

WestLB’s Mr Langer did not expect the problems to end in the second quarter. "In the third quarter we will have the iPhone 5 and Samsung’s Galaxy S3 and so on, so Nokia’s earnings per share for 2012 are now somewhere in limbo," he said.

Nokia said it sold more than 2-million units of all its Lumia smartphone models in the quarter to end March, up from about 1-million in the November-to-January period. Analysts said they expected a faster uptick in sales.

Mikael Rautanen of research firm Inderes said he was expecting twice the sales volume.

The battle to recover lost ground was made a little harder by the data connection bug in the Lumia 900, Nokia’s first 4G phone, which it markets with the strapline "an amazingly fast way to connect".

Nokia said a software update to fix the problem, a "memory management issue" related to phone software, not to hardware or the Windows operating system, would be available next week.

It is offering anyone who has bought a Lumia 900 phone, or who buys one by April 21, a $100 credit to their AT&T bill. The operator sells the phone for $99,99 with a two-year contract.

The Lumia 900 is currently available only in the US.

Reuters