Nokia shares plummeted by 15 percent yesterday evening after the Finnish company announced it was downgrading its profit expectations for Q2 2011.....to zero.
That’s right people, Nokia has so little confidence in its Symbian smartphones that it believes that all profits will be wiped out. “Nokia now expects Devices & Services net sales to be substantially below its previously expected range of €6.1 billion to €6.6 billion for the second quarter 2011. Nokia's current view is that second quarter 2011 Devices & Services non-IFRS operating margin could be around breakeven.” It is an amazing turnaround from last year when Nokia reported profit of €643 million on revenues of €6.8 billion sales for Q2 2010. Even last quarter it posted profits of €690 million on sales of €7.8 billion. Turning to prospects for the rest of 2011, Nokia said: “Given the unexpected change in our outlook for the second quarter, Nokia believes it is no longer appropriate to provide annual targets for 2011.” Of course with Windows Phone handsets due at the end of the year, it would have been hard for Nokia to predict with any accuracy how this will go.
Stephen Elop has been under pressure from the moment he took control last September and having put his faith in former employer Microsoft to turn the fortunes of Nokia’s smartphones around, he, more than anyone. will want the first Windows Phone Mango handset to succeed. "Strategy transitions are difficult. We recognise the need to deliver great mobile products, and therefore we must accelerate the pace of our transition," Elop said. "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." With Nokia’s share of the smartphone market predicted to slip below 20 percent this year, down from 40 percent two years ago, it is a worrying time for all involved with the Finnish manufacturer.
Analysts at Gartner predict that things are going to get worse before they get better and we would have to agree. Even if Nokia’s first Windows Phone handset does arrive before the end of the year, there is no certainty that it will be a success and it could be some time before these handsets make a profit.