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Rivals weaken Nokia, Motorola Mobility outlooks

Shares of both handset manufacturers fall after they predicted losses in first-quarter forecasts due to increased pressure from Apple and Android devices, according to reports.
Written by Jamie Yap, Contributor

Both the shares of Nokia and Motorola fell amid dismal forecasts for the first quarter, according to reports, undermining their leaders' efforts to boost handset sales as the onslaught from Apple and Android continues.

Bloomberg reported on Friday that Motorola Mobility--the mobile devices arm following the Jan. 4 split from its networking division--dropped 12 percent on the New York Stock Exchange to US$30.51.

The company predicted a first-quarter loss of 9 to 21 cents per share as sales slowed due to Verizon Wireless' impending iPhone launch next month, the report added.

Analysts polled by Bloomberg expressed a more positive outlook, though, forecasting a 1 US cent profit per share.

Finnish handset maker Nokia also saw its shares slip after CEO Stephen Elop acknowledged it was facing "some significant challenges in our competitiveness and our execution", according to a separate Bloomberg report.

Nokia's share tumbled 8.7 percent in Helsinki, and closed closing 0.8 percent lower at 7.74 euros (US$10.60), it stated.

Both reports had industry voices bemoaning the bleak financial outlooks of the two companies.

London-based analyst Pierre Ferragu from Sanford C. Bernstein, for one, called Motorola Mobility's outlook "slightly disappointing" and expressed concerns that Motorola's growth potential is limited by the company's footprint.

Meanwhile, Leon Cappaert, fund manager at KBC Asset Management in Belgium, which has investments in Nokia shares, similarly expressed anxiety over the Finnish company. "What spooks everyone is the outlook: a combination of lack of giving an upside and disappointing margins," he said.

Apple and Android loom large
Both Motorola Mobility CEO Sanjay Jha and Elop are looking to fend off competition from Apple's iPhone and Google's Android-based smartphones, Bloomberg noted.

For Motorola Mobility, competition will intensify once Verizon begins sales of the iPhone. The carrier is one of Motorola's staunchest allies, selling more of its phones than other U.S.-based carriers, the news wire said.

"We have seen some slowdown as a result of the announcement at Verizon," Jha said in the report, adding that "Android's popularity will help [Motorola] compete with Apple".

He also revealed that Motorola expects to ship between 20 to 23 million smartphones and tablets in 2011, and that Xoom, its first tablet, will be competitively priced to take on more expensive models like the iPad from Apple.

Since adopting the Android OS for its mobile devices, the company's sales have gotten a shoot in the arm, culminating in the company's return to profit for the first time since 2006, the report noted.

Nokia on the ropes
Nokia, on the other hand, are in more dire straits with neither analysts nor investors holding out any hopes for an improvement in company's fortunes, Bloomberg stated.

Alexander Peterc, an analyst with Exane BNP Paribas, said that he expected downgrades between 15 and 20 percent per share for first-quarter earnings and between 5 and 15 percent for full-year earnings, "depending on how negative people get".

Fellow analyst, Andy Perkins from Societe Generale Corporate & Investment Bank, said that Nokia itself is predicting a difficult first quarter that is "certainly much tougher than the markets were hoping for".

Analysts are expecting Nokia to ditch Symbian for either Google's Android or Microsoft's Windows Phone 7 OSes, said a New York Times report.

However, Nokia announced last December that Symbian will continue to be its main business-phone platform, even when its new top-end OS, MeeGo, is launched.

However, devices powered by MeeGo OS have yet to enter the market, Bloomberg pointed out.

" If we rush to market with something that is below what our brand should stand for, then we will do long-term harm," Elop explained in the report. The CEO added that he will lay out his strategy for the company at Nokia's investor meeting in London on Feb. 11.

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