Nokia stocks took a hit with the new announcement of a profit warning from the company in Espoo, Finland. Analysts are predicting hard days ahead for Nokia, and this just after the change in strategy from the Nokia COO, Stephen Elop.
Nokia, the company that invented the smartphone, once had a commanding market share in the world of mobile phones. Now all that is changing. Nokia is still the commanding seller of smartphones. Even in its worst quarter, Q1 2011, Nokia sold 24 million of their smartphones. By comparison, Apple sold 18 million. The news of a “profit warning” would seem to be a mistake. The problem came when the usual trickle down of prices on Nokia devices did not happen. Sales are being affected because the cost of a Nokia smartphone went up, against their past business practices.
The profit warning is also the result of Nokia abandoning the development of Symbian, a true mobile operating system. This system was their “goose that laid the golden eggs”. With the new partnership with Microsoft, Symbian was handed to a third party and with it went the profits. The termination of Symbian is stated to be a big part of why a profit warning was issued. Some are even going as far as stating it was “market share suicide”.
Shares in Nokia plunged 17.5 percent a few days ago as Nokia announced that there may be no profits on phone sales until the end of June. Operating margins are predicted to be “substantially below” the six to nine percent range. This is result of slow sales. Challenges from China manufacturers who can make feature phones as well as Nokia have also sprung up. For more expensive smartphones, Apple has been giving Nokia the fits as well with their iPhone competition and popularity.
The new cooperation with Microsoft has not buoyed Nokia like some thought it would. A recent keynote speech yesterday by the COO of Nokia seemed comforting to some American investors, but delusional to some analysts. A horrific fall is happening to Nokia and currently looks to continue on.
The economic troubles for Nokia are also affecting other major manufacturers of smartphones. Research In Motion ( RIM ) is also experiencing a slide in shares, thanks to the news about Nokia. The good news for RIM is that their shares only fell 4.4 percent. Nokia does plan on releasing smartphones with their new Microsoft partner until the end of the year. The Nokia stock market plunge brought the company to a 13 year low.
