Nokia’s hopes of meeting their key targets have been abandoned by the company just a couple of weeks after being set. This has raised a lot of questions on whether the new head of the Finnish cell phone manufacturing giant can deliver on the promises he made in February of a turnaround in Nokia’s fortunes. The shares of the company have gone down by 18% to their lowest value in the last 13 years. This has reduced its market value by a whopping $5.5 billion and investors are starting to worry that the company which was an industry leader a short while ago is losing so much market share that it may never again regain the same foothold over the market that it used to have.
Nokia has lost ground in the market for smart phones to Google’s Android phones and Apple’s iPhone. It has also been overtaken by lightweight Asian competitors in the lower end segment. As a part of an overhaul of its phone business which was set out by its new CEO Stephen Elop, Nokia is switching from its own Symbian mobile platform to Microsoft Corp’s Windows Phone 7. However, the company continues to struggle against the mounting competition, which was made all the more clearer on Tuesday when it announced that it expects the second quarter sales of its devices and services business to be substantially below the previous forecast made by the company in April this year at between 6.1 billion euros and 6.6 billion euros.
Elop, who was brought in last year in an attempt to revive the flagship technology company of Finland, put the blame on price cuts and weak sales noting that the competition in Europe was particularly tough. He told the analysts in a conference that Android and Apple are both continuously gaining strength. He also added that the business in China, where Nokia is facing competition from companies like ZTE Corp, had been hurt by management issues.
The company said in a public statement that considering the unexpected changes which took place in the outlook of the company in the second quarter, Nokia now believes that it isn’t appropriate to provide annual targets for this year. However, it will still provide quarterly updates. Nokia has forecast its non-IFRS operating margin for services and devices to be near break even in the second quarter, rather than the range of 6% to 9% expected previously.
