Industry analysts professed themselves "shocked" yesterday when Nokia announced that its vitally-important Devices and Services arm will make a loss in Q1 - and that Q2 will also be dire. These people must be living on a different planet to the rest of us to whom the "news" had long been a foregone conclusion. Martyn Warwick reports.
As the Finnish handset maker's fall from grace accelerated, 18 per cent was wiped off the value of the company's already heavily depreciated share price to take it down to its lowest level for 15 years.
In a statement, Nokia said, "During the first quarter 2012, multiple factors negatively affected Nokia's Devices & Services business to a greater extent than previously expected."
It seems Nokia was/is unable to factor in to its forecast calculations such unexpected intangibles as competition in the smartphone sector and the evident fact that the global recession, austerity and unemployment in the West is leaving people with less disposable income who therefore are not buying as many expensive consumer durables are they are wont to in economic good times.
Thus Nokia seems surprised that "competitive industry dynamics" and "gross margin declines" rendered its forecasts redundant. With masterful Nordic sang froid it described the figures as "disappointing".
Last time it cast the runes, Nokia reckoned it would be at breakeven in Q1. It now says it will "around negative three per cent" while Q2 to be "similar or below" to Q1's miserable figures. For some reason, industry analysts had been expecting a profit margin of 0.4 per cent for Q1 and 2.1 per cent Q2 and thus expressed themselves taken aback by Nokia's poor performance.
However, the boy stood there on the infamous burning deck, Stephen Elop, Nokia's CEO, claims that he and his management team "are continuing to increase the clock speed of the company." Does anyone have any idea what that means? It sounds as though it was lifted directly from" My Little Book of Corporate Gobbledygook".
In the world according to Elop, the run of abysmal results is because Nokia is in the middle of transitioning the company over to using Microsoft's Windows Phone OS as its main software platform.
However the CEO draws comfort from the fact that the company has shifted "more than" two million Lumia handsets at an average retail price of €220.
Wishful thinking and wilful self-deception won't be enough to stave off further losses. Q3 will see the introduction of new devices including the iPhone 5 and Samsung's Galaxy 3 and Nokia seems to have almost nothing left in its locker to counteract the effects these, and other, new releases will have on its depleted fortunes. The whole year looks dire.
Mr. Elop signally failed to mention that the launch of the Lumia 900 in in the US (by AT&T) was marred by a data connectivity problem that had subscribers up in arms and demanding compensation. As well as instituting a refund programme Nokia also announced that punters signing-up for a Lumia 900 with AT&T at its price of US$99.99 on a two-year contract will get a $100 rebate on the deal. In other words, they get the phone for free. Good business.
Nokia's latest figures speak for themselves. Q1 mobile phone shipments totaled 71 million units. In the same quarter a year ago the figure was 108 million. If that's not bad enough, Nokia's smartphone sales have actually halved over the past 12 months.
As the company;'s market share continues to decline and sales falter the company is struggling to devise a coherent strategy to save itself. More than 14,000 jobs have gone over the past 16 months and, next year, Nokia will cease to make any handsets in Europe. It is shifting production to the Far East in the hope that lower wage bills and a faster route to the Asian markets will save its bacon.
Stephen Elop also announced that Nokia is to launch some unspecified new products in Q2 and will take “tactical pricing actions in the near term”, "increase cost-cutting measures" and “pursue significant structural actions if and when necessary.”
They are necessary now, Mr. Elop.
Nokia will publish full Q1 details on April 19. They will make grim reading.
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