Nokia's devices and services business stumbles

Stuart Corner
Wednesday, 01 June 2011 05:39

IT Industry - Market

Nokia has downgraded its forecasts for the performance of its devices and services business in Q2 of 2011 and says it will not provide any guidance for the full year.

"During the second quarter 2011, multiple factors are negatively impacting Nokia's Devices & Services business to a greater extent than previously expected," the company said.

"These factors include:
- 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 says it expects devices & services net sales to be substantially below its previously expected range of EUR6.1b to EUR6.6b for the second quarter 2011 as a result of both lower than previously expected average selling prices and lower than expected sales volumes. It expects non-IFRS operating margin to be substantially below its previously expected range of six percent to nine percent for the second quarter 2011, saying it could be around breakeven.

It adds that: "Given the unexpected change in our outlook for the second quarter, Nokia believes it is no longer appropriate to provide annual targets for 2011."

Nokia's previous targets for the third quarter, fourth quarter, and full year 2011 were: 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.

Nokia says it is taking immediate action to address the issues, that its high-level strategic objectives and targets remain unchanged and that it is continuing to invest to bring new innovative capabilities to its Symbian line up.

Of its alliance with Microsoft on which so much now depends, Nokia says it remains pleased with its progress. President and CEO, Stephen Elop, said: "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."