It was revealed on Thursday that Nokia (NYSE:
) reported heavy losses in the first quarter. The world's biggest
handset manufacturer said that it has faced greater than expected
competitive challenges in its ongoing strategy overhaul.
The Finland-based company said in a statement that total
operating costs for the three months ending March 31 was 1.34
billion euros ($1.76 billion). This seems all the more dramatic
when compared to the 439 million operating profit the previous
year. Analysts had expected a 734 million euro loss.
Net loss came in at 929 million euros, from a 344 million euro
profit the previous year. Expectations had been a 554 million
euro loss. Revenue, meanwhile, fell 29% to 7.35 billion
CEO Stephen Elop said that, "We are navigating through a
significant company transition in an industry environment that
continues to evolve and shift quickly. Over the last year we have
made progress on our new strategy, but we have faced greater than
expected competitive challenges."
With an ever-increasing level of competition hitting
performance, NOK is abandoning the in-house Symbian software in
favor of Microsoft's (NASDAQ:
) Windows for its handsets. Like every other handset maker in the
industry, Nokia is struggling against Apple's (NASDAQ:
) iPhone, plus more traditional makers like Samsung and HTC.
On Thursday, Morgan Stanley released a research report stating
that Nokia's Devices & Services EBIT margin of -3% was in
line with recently lowered guidance. The EBIT margin in
smartphones collapsed to -18% and feature phones reached only 5%,
both because of significantly lower revenues (50% and 30% down
YoY, respectively). Q2 margins are still expected to be at or
below -3%, no change vs last week.
Morgan Stanley also said that there is currently no new
guidance for cost-saving, but management indicated that it is
working on new measures to be announced in due course. It is now
guiding towards a €900m restructuring charge in Devices (vs no
guidance before and our previous €500m estimate, implying higher
cash burn for FY2012).
On Wednesday, Deutsche Bank said that it assumes that Apple
royalty revenues will be lower in Q2 vs Q1. This is because it
expects a seasonally lower quarter for Apple iOS shipments in Q1
(36m) vs Q4 (52.5m), which it believes Nokia recognizes with a
1-quarter lag. Deutsche estimates lower Apple royalty revenues
could impact device revenues and gross profit by ~E50m or c.
(c) 2012 Benzinga.com. All rights reserved. This material
may not be published in its entirety or redistributed without
the approval of Benzinga.