Nokia cuts outlook, cites competition, Euro, pricing

Nokia cuts outlook, cites competition, Euro, pricing

Summary: Nokia cut its second quarter and 2010 outlook due to "multiple factors" including fierce competition and higher costs. Nokia said its device sales will be at the lower end of its range.

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Nokia cut its second quarter and 2010 outlook due to "multiple factors" including fierce competition and higher costs. Nokia said its device sales will be at the lower end of its range.

As noted before, Nokia is feeling the heat from Research in Motion and Apple in the smartphone market. Simply put, Nokia just doesn't have a smartphone response yet. It doesn't help that the decline of the Euro vs. the U.S. dollar has increased its cost of goods sold.

The decline of the Euro really hurts as Nokia is getting squeezed on pricing on the low end. Analysts have said that Nokia is being squeezed by Samsung and LG on mobile phones. Both of those rivals are aggressively pricing to gain share on Nokia.

In short, Nokia can't use price as a weapon as easily across the globe. Toss in the fact that Nokia lacks the high-end smartphones to keep RIM and Apple, two companies hellbent on competing in key markets like China, at bay. Nokia's new smartphones (right) don't arrive until the third quarter.

Nokia's new outlook goes like this:

  • Device and services sales will be at the lower end or "slightly below" its range of 6.7 billion to 7.2 billion Euro for the second quarter. The decline is due to lower average selling prices and volume.
  • Device and services operating margins will be below Nokia's 9 percent to 12 percent target.
  • For 2010, Nokia expects the industry's mobile device volume to grow 10 percent.
  • For 2010, Nokia plans on keeping market share flat.
  • Nokia expects to lose share in the high-end phone market.
  • Full year operating margins will fall short of the 11 percent to 13 percent target.

Nokia reports earnings on July 22.

The only good news for Nokia is that analysts seem to have been expecting the worst. Simply put, expectations for Nokia were extremely low. In a research note June 13, Oppenheimer analyst Ittai Kidron chronicled how Nokia's second quarter was unraveling.

Kidron wrote:

Based on our most recent channel checks, we believe Nokia's performance in the quarter is likely worse than we first envisioned in our recent company update on 5/26. Our checks suggest the company is challenged on almost every front, from pricing pressures through share losses to poor product mix (graphic and tier). We're aggressively cutting our estimates (2Q10 EPS of €0.10 vs. consensus €0.14) and wouldn't be surprised to see even further downside to our well below Street revised targets as the only possible relief (N8 and C7) is still more than a quarter away.

We believe Nokia is seeing strong competitive pressures from Samsung and LG, which are aggressively pricing this quarter. Also, the Chinese vendors continue to take share.

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Topics: Mobility, Hardware, Nokia, Smartphones

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2 comments
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  • Sack the French ECB leader

    Well one of those, the decline of the Euro can be laid squarely at the foot of the head of the ECB, Jean-Claude Trichet.

    See what they have been doing is illegal under Maastricht, they have been buying Greek junk bonds for real Euros. Driving up inflation and driving down the Euro.

    Devaluing Euro and stealing the value of savings of Europeans in order to prop up the Greeks.

    http://www.spiegel.de/international/europe/0,1518,697680-2,00.html

    See the UK did quantitative easing which is basically monetary fraud with a fancy name.
    And the US has been doing it for donkeys year, they haven't made a profit since the 90's, simply printing the worlds trading currency and spending the worlds growth.
    The Japanese are so slack their currency isn't used as a trading currency at all, they have 2 decades of stagnation.

    The one shining beacon of fiscal stability, the only properly run currency was the Euro, and now the French head of the ECB has destroyed that confidence with his tricks.

    So what needs to happen now, is the ECB needs to be brought back within the hands of the Germans, and the Greeks left to collapse in the tough love they deserve.

    Better to let the little tiny Greek economy collapse, and kick them out of the Euro zone than to accept French monetary fraud.
    guihombre
  • nokia is dead

    nokia is getting squeezed out at the low end by chinese cheap skates and the more price agressive lg and samsung and at the high end by apple and htc. their average smartphone price is already very low ($200 vs. apple's $600). so even here their margins are already razor thin. any more pressure and nokia will collapse. but rightfully so, they sat on their lazy asses for long enough. if it wasn't for apple and copycat google we wouldn't have the smartphones we have today. thanks for nothing nokia. no one will shed a tear when you're gone.
    banned from zdnet