Nokia lowered its first-quarter profit forecast on Wednesday as demand for
its Symbian-based smartphones, which the company is phasing out, weakened sharply
amid the transition to phones using Microsoft’s Windows Phone software.
Nokia,
the world’s largest maker of cellphones by volume, said its operating margin in
the first quarter for devices and services, which make up 60 percent of sales,
would be a 3 percent loss. Previously, it forecast a margin of “around
break-even, ranging either above or below by approximately two percentage
points .”
Shares
of Nokia fell 15.7 percent, to $4.24, on Wednesday.
Pete
Cunningham, an analyst at Canalys, a research firm in Reading, England, said
Nokia was witnessing eroding demand for its Symbian handsets, a drop that
accelerated in the five months after Nokia introduced its first Lumia phones
with Microsoft software in October .
“The appetite for Symbian has evaporated
quickly,” Mr. Cunningham said. “They haven’t been able to ramp up the Windows
Phone lineup to offset the balance .”
Nokia’s
president and chief executive, Stephen Elop, attributed the profit revision to
the company’s transition to Microsoft software, saying Nokia would accelerate
cost-cutting measures and explore unspecified “structural changes” if necessary The
company began selling two..
Lumia models in November and unveiled two more this year.
In the
United States, Nokia’s Lumia phones are available on the AT&T and T-Mobile
networks. Nokia has not disclosed specific sales numbers for Lumia handsets in
America, but Mr. Elop has said that the Lumia 710 smartphone on T-Mobile has
“exceeded expectations .”
Nokia’s
Lumia 900 on AT&T’s network was released Sunday and quickly became a
top-selling handset on Amazon.com — a sign of a strong opening week, said Tero
Kuittinen, an analyst and vice president at Alekstra, a company that helps
customers manage their cellphone bills.
“I have to say I’m pretty impressed by
how it’s doing on Amazon.com,” he said, adding that Amazon is an important
sales generator for mobile phones. “Who knows how long that’s going to last?
But at least they made the splash.”
Nokia
once had a strong presence in the United States but has been overrun by Apple’s
iPhone and makers of phones using Google’s Android operating system.
Nokia
said it sold two million Lumia smartphones in the first quarter at an average
price of 220 euros, or $288. Sales of the new phones have increased since their
introduction last year, the company said. But the transition has not been problem-free.
Nokia
also said Wednesday that it had made a software fix available to buyers of the
Lumia 900 to correct “memory management” problems.
Nokia
offered to exchange Lumia 900s for new phones with the updated software. Buyers
can also download the software update starting Monday through Microsoft’s Zune
service. Nokia said that anyone who bought a Lumia 900 through April 21 would
receive a $100 credit to their AT&T bill, paid by Nokia.
“Lumia has gained market share with both
distribution partners and consumers,” Mr. Elop, a former Microsoft executive,
said in a statement. He said Nokia’s transition to Microsoft software would
continue to weigh on the company’s results at least into the summer.
Nokia
said it expected its operating margin for the second quarter to be similar to
or lower than the 3 percent loss in the first quarter. The company planned to
publish its first-quarter financial results on April 19.
To
navigate the transition, Mr. Elop said, Nokia will increase investment to
expand its range of Lumia handsets. The company will also make short-term
“tactical pricing actions” to improve sales of its basic cellphones, which
account for the bulk of Nokia’s handset revenue.
He did
not specify cost-cutting measures or the amount of investment.
Nokia
said weak sales in several core markets, including India, the Middle East, Asia
and China, prompted the profit warning. Mr. Cunningham, the Canalys analyst,
said Nokia’s Lumia lineup in China was being overshadowed by Apple’s iPhone 4S.
“Obviously, with the introduction of the
iPhone 4S, the competitive landscape has become tougher there for Nokia,” he
said. He added that he expected Nokia to have “some tough quarters ahead” as it
ramped up Lumia sales.
Canalys
is forecasting that Microsoft’s share of the global smartphone operating market
will increase to 6 percent by the end of this year, from 1.3 percent in
December, an increase primarily being driven by sales of Nokia’s Lumia handsets
INT Staff .
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