Nokia shares take 'icy plunge' after profit warning

Nokia shares take 'icy plunge' after profit warning

Nokia shares crashed 22pc after the world's largest mobile phone company said it might not make a profit in its core business this quarter, slashed revenue forecasts, and scrapped all targets for 2011.

Stephen Elop, chief executive, said earlier this year Nokia is like a man on a burning oil platform, who must decide whether to plunge into icy waters or perish. Photo: EPA

By Josephine Moulds

5:53PM BST 31 May 2011

Comments

The Finnish company is struggling to keep up in a mobile phone market that has been transformed by the BlackBerry, iPhone, and Google's mobile operating system, Android. In China, it has been hit by price competition for cheaper phones.

Earlier this year, Stephen Elop, chief executive, said Nokia was like a man on a burning North Sea oil platform, who must decide whether to plunge into icy waters or perish. His language yesterday was less flowery, but the numbers suggest the "icy plunge" has been far from easy.

The core devices and services division may only just break even in the second quarter, rather than achieve the 6pc to 9pc operating margins that had been forecast. Sales are expected to be "substantially below" the previous target of €6.1bn to €6.6bn (£5.3bn to £5.8bn) for the quarter.

Nokia said it could not provide financial forecasts for the rest of the year, and any previous targets are no longer valid.

"Going through this transition, it's hard," Mr Elop said. "There is definitely less visibility than we'd like; 2011 will be a difficult year."

He is betting on a new alliance with Microsoft to regain market share in the smartphone market. Research by Gartner shows that Nokia's share of the global smartphone market in the first quarter crashed to 27pc from 44pc a year earlier.

Mr Elop said yesterday Nokia still plans to ship its first product with Microsoft's Windows operating platform in the fourth quarter this year.

Ryan Kim from technology blog GigaOm said: "It will have to get that first wave of devices right or risk losing even more of its reputation. The margin of error keeps getting smaller for Nokia with each passing quarter."

stephen elop, north sea oil, nokia shares, mobile phone market, mobile phone company, core devices, finnish company, forecast sales, oil platform online, revenue forecasts, google, financial forecasts, burning oil, 6pc, operating margins, target, iphone, price competition, new alliance, first wave

Telegraph.feedsportal.com