Nokia Corp.
(
NOK
) recently slashed its profit outlook for the forthcoming quarters
citing stiff competition, market share losses stemming from the
lack of innovative products in its portfolio.
Earlier, Nokia teamed up with
Microsoft Corp
. (
MSFT
) to launch their first Windows-based smartphones. But the move was
not at all accretive for the company as it sold 12 million
smartphones in the first quarter of fiscal 2012 versus 19.6 million
smartphones in the fourth quarter of fiscal 2011. Moreover, the
company sold a mere 2 million Lumia series of handsets in the first
quarter of fiscal 2012 while
Apple, Inc.
(
AAPL
) sold a million iPhone 4S devices within first six days of its
release.
According to a data released by IDC, Nokia continued to hold the
top spot at the end of the fourth quarter of fiscal 2011, with
26.6% market share versus 30.7% market share by the end of the
fourth quarter of fiscal 2010 followed by Samsung Electronics and
Apple.
During the ongoing quarter, Nokia sold 71 million mobile devices
versus 108.5 million devices in the first quarter of fiscal 2011.
The steep decline in mobile device sales is mainly attributable to
poor performance of the company's handset business in the emerging
nations of India, China, and Middle East and Africa.
Developing nations have for long been Nokia's stronghold.
However, with the advent of cheaper Android-based mobile phones in
those price-sensitive regions, Nokia is again losing market
share.
In the fourth quarter of fiscal 2011, Nokia reported a 9%
decline in Average Selling Price (
ASP
) for smartphones to €140 while ASPs for traditional mobile phones
declined 24% to €32 in the same period. Therefore, with both
volumes and prices taking a hit, the company's margins are likely
to remain under pressure. The $100 compensation promised to the new
users of Lumia 900 in U.S. that encountered software problems will
make matters worse.
During the first quarter of 2012, Nokia expects the operating
margin to be a negative 3%, much lower than the previously
mentioned guidance of breakeven operating margin for its non-IFRS
Devices & Services.
Likewise, Nokia expects its second quarter 2012 operating margin
for its non-IFRS Devices & Services to be flat or below the
first quarter operating margin.
Currently, Nokia has a Zacks#5 Rank, implying a short-term
Strong Sell rating on the stock.
Based in Espoo, Finland, Nokia Corporation is the largest mobile
phone maker of the world. The company also provides Internet
services, comprehensive digital map information and equipment, and
other solutions and services throughout the world.
APPLE INC (
AAPL
): Free Stock Analysis Report
MICROSOFT CORP (
MSFT
): Free Stock Analysis Report
NOKIA CP-ADR A (
NOK
): Free Stock Analysis Report
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