Nokia cancels financial targets for 2011

Anticipating annual sales and profits to turn out substantially below its previous forecasts, Nokia has cancelled its outlook for the year.

In a statement on Tuesday, noting that "multiple factors are negatively impacting Nokia's Devices & Services business to a greater extent than previously expected", the handset maker said it was "no longer appropriate to provide annual targets for 2011".

The factors include competitive dynamics and market trends, a shift to cheaper phones, and "pricing tactics" by Nokia and its competitors, the company said.

"Nokia now expects Devices & Services net sales to be substantially below its previously expected range of €6.1bn to €6.6bn for the second quarter 2011," the statement read. "This update is primarily due to lower than previously expected average selling prices and mobile device volumes."

The company expects its operating margin for the quarter to be "around breakeven", rather than between six and nine percent as earlier forecast.

Nokia's market share has plummeted over the last year from 44.2 percent to 27.4 percent, despite a slight increase in sales. This discrepancy between sales and market share is largely down to drastic growth in the smartphone market as a whole.

Despite the cancellation of its annual forecast, Nokia said it expects to still provide short-term quarterly forecasts in its interim reports, "as well as annual targets when circumstances allow it to do so".

Although the company's "high-level strategic objectives" remain unchanged, it is taking immediate action to address the issues, Nokia said. It added that it still expected Devices & Services sales to "grow faster than the market" once it has moved from being a Symbian company to a Windows Phone company.

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

UPDATE (4pm): Two hours after Nokia's announcement, and the company's share price on the Frankfurt stock exchange is down 17 percent. Stay tuned...

UPDATE (Wednesday 11:15am): Nokia's share price continues to fall.