While Nokia has maintained an optimistic outlook about the sales of its Lumia phones, investors are fearing the exact opposite and are bracing themselves for poor second quarter results that are to be declared this week. The Lumia phones are supposed to be vital to the turnaround efforts that Nokia has been putting in to beef up its market share as well as its cash reserves that have depleted considerably.
Nokia was once the market leader in mobile phones but because of the delay in incorporating smartphones into its lineup, it lost out the most important segment to Apple and other companies like Samsung. Now, the company is making efforts to gain a foothold in the smartphone segment with the introduction of smartphones running on the Microsoft Windows Phone 7 platform and it has hoped that the results would be favorable. However, customers still prefer Apple’s iPhone and devices based on the Google Android OS to the Nokia phones running on the Windows OS. There has no doubt been an improvement in the sales of Nokia’s Lumia phones over the second quarter, rising from 2 million in the previous quarter to 4 million in this quarter, but this is very small compared to Apple’s projected 30 million iPhone sales and Samsung’s expected 50 million smartphone sales.
The introduction of the Windows Phone series has not been favorable for Nokia in the stock market either. The company’s share shed 84% of its value to a present valuation of 1.37 Euros. Even more disturbing is that a whopping 13.2% of Nokia’s shares have been put out on loan implying that investors are preparing to lose out on their money and expect the value to drop further. In the first quarter of this fiscal, the three largest rating agencies in the world labeled Nokia’s shares as “junk” as the company made public statements issuing warnings about its profits and prepared to cut 20% of its jobs.
Nokia is expected to report a loss of 706 million Euros and use up at least 1 billion Euros of its cash reserves over three months. Since last fiscal, the company has gone through a whopping 2.1 billion Euros of its cash reserve and if it goes this way, all its coffers worth 4.9 billion Euros will be empty within a few years. However, the net cash in Nokia’s hands is expected to drop to 3.7 billion Euros by the end of the second quarter and to 3.2 billion Euros by the end of the third.
