Nokia's Glow Keeps Fading
Apr 11th 2012 11:23PM
Updated Apr 11th 2012 11:24PM
Nokia (NYS: NOK) just had one its biggest device launches ever this last weekend at carrier partner AT&T (NYS: T) , with Ma Bell spending more marketing dollars than it did on Apple's (NAS: AAPL) iPhone as it bets big on its exclusive grip on the Lumia 900.
The launch's glow didn't last long, as the Finnish phone giant has just now slashed its guidance for the current quarter and the next one. Ouch.
The company cited its poor performance to "competitive industry dynamics." Translation: The iPhone and Google (NAS: GOOG) Android are eating our lunch. Nokia also expects gross margin to decline in its smartphone business. A small bright spot was that this was partially offset by a big benefit from lower warranty costs.
Nokia expects that its devices and services business to generate a negative-3% operating margin in the first quarter, worse than its previous guidance of "around breakeven" with a plus-or-minus 2% range. It's only going to get worse in the second quarter, as the company believes the segment's operating margin will be "similar to or below the first quarter 2012 level."
CEO Stephen Elop said the "disappointing" figures just show that its business is "in the midst of transition," while the company continues to invest in its new Lumia lineup, which runs Microsoft (NAS: MSFT) Windows Phone.
The devices and services segment is estimated to have generated 4.2 billion euros (about $5.5 billion) in sales. Most of its business continues to be regular mobile phones, with 71 million units sold, while it sold just 12 million smartphones. Nokia was able to sell more than 2 million Lumia devices in the quarter, showing that the new family is off to a decent start since November.
Nokia continues to bet big on Windows Phone in the belief that it can be the third major OS player, while pointing out that the ecosystem now has 80,000 apps available.
Less than a year ago, Nokia was forced to similarly cut its guidance, but those figures look awfully rosy compared with today's picture, since its business continues to deteriorate. Nokia is set to report full first-quarter results on April 19.
Nokia investors are running out of patience, as shares got crushed by more than 15% today. I'm surprised they still had any patience left in the first place.
At the time this article was published Fool contributor Evan Niu owns shares of AT&T and Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Microsoft, Apple, and Google. Motley Fool newsletter services have recommended buying shares of Microsoft, Apple, Nokia, and Google and creating bull call spread positions in Microsoft and Apple. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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