Nokia can’t stop falling – Now issued profit warning


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Tuesday, 31 May 2011
Nokia will not honour the forecasts issued for revenue and operating margins, the company announced in a press release on Tuesday.

The Finnish mobile giant may scale back dramatically for the division Devices & Services. It is so glaring that the group will no longer give figures for the division, writes the Nokia in a stock exchange announcement.
The downgrade is triggered by a decline in sales and increased competition. Nokia is also plagued by the fact that the market trend is towards cheaper phones.

"Nokia now expects sales of Devices & Services in the second quarter will be significantly lower than the previously reported €6.1 to €6.6 billion. It is mainly due to lower than expected average selling prices," writes the Nokia.

The operating margin in Devices & Services will be considerably lower than the 6-9 percent it previously predicted. The new assessment is that the margin in the business area will be around zero in the second quarter and this is mainly based on lower than expected sales.

During the second quarter, several factors negatively affected Nokia's range Devices & Services, more than expected. These factors include competition, particularly in China and Europe, a product mix shift to terminals with lower average prices and lower gross margins, and price tactics by Nokia and some competitors.

Nokia also takes away its previous target for the year 2011 Nokia will continue to provide quarterly forecasts in the quarterly and annual targets if situation permits.

Nokia's previous forecast was that the net sales of Devices & Services in the third quarter would be roughly the same level as in the second quarter, and seasonally higher in the fourth quarter of 2011 compared to third quarter 2011. The forecast was that the operating margin in Devices & Services would be between 6 and 9 percent for 2011. These forecasts are thus no longer valid.

The company says that they are working to solve problems and that the overall strategic objectives are unchanged. This will allow Nokia to continue investing in the Symbian system and the cooperation with Microsoft.

"Strategic transition periods are difficult. We recognize the need to deliver outstanding mobile products, and therefore we must hasten the development process," said CEO Stephen ELOP in the message.

Nokia shares fall after notification by 9 percent on the stock exchange in Finland
By Team

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