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Smartphone competition hits Nokia; shares drop

Smartphone competition hits Nokia; shares drop
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First Published: Thu, Apr 22 2010. 08 51 PM IST
Updated: Thu, Apr 22 2010. 08 51 PM IST
Helsinki: The world’s top cellphone maker, Nokia Oyj cut its profit outlook and delayed the launch of phones it needs to compete with the iPhone and BlackBerry in the fast-growing high end of the market.
“We will not ship the product before the quality is something that will meet the end-user needs and demands,” said chief executive Olli-Pekka Kallasvuo on a conference call.
Nokia still lacks a top-range model to challenge Apple Inc.’s iPhone three years after its launch. Its last high-end hit phone was the N95, which was unveiled in 2006. The launch of Symbian 3 phones was pushed back from the first quarter to the second.
“This is pretty significant as Nokia and Symbian have lost a lot of market share in the last few years,” said analyst Neil Mawston from Strategy Analytics Inc. “Psychologically it is a blow as well, as iPhone, BlackBerry and Android are surging ahead with software updates. Symbian cannot afford any delays.”
Nokia reported a rise in its first quarter earnings and sales on Thursday, roughly in line with expectations, but cut the outlook for its 2010 operating profit margin at its key phone unit to 11-13%. The average forecast of 33 analysts in a Reuters poll was 13.7%.
Shares in Nokia, which makes one in three phones sold globally, were 14% lower at €9.70 (around Rs570) at 8.30pm.
The smartphone market continued to grow through the economic downturn, helped by cheaper models. Research firm Gartner Inc. has forecast it will grow 46% this year.
Nokia slashed prices of its cellphones across its portfolio this week, with the deepest cuts of around 10% seen for some smartphone models, data seen by Reuters showed on Thursday.
As it battles with new rivals Apple and BlackBerry maker Research in Motion Ltd (RIM) at the high end of the cellphone market, it sees a cheaper price as its strongest weapon to hold onto market share, analysts said. The average sales price of a Nokia smartphone fell 17% from the previous quarter to $208 (around Rs9,250). That compares to more than $600 for the iPhone.
Apple’s quarterly results blew past Wall Street expectations on the back of record iPhone sales earlier this week, and the company gave a strong revenue forecast, sending its shares to an all-time high.
Nokia results hit shares in smaller rivals Motorola Inc. and RIM, which were seen opening around 1% lower. Shares in Nokia suppliers STMicroelectronics NV and Infineon Technologies AG were 3.3% and 2.3% lower, respectively.
Nokia’s underlying first-quarter earnings per share rose 40% from a year ago to €0.14 and sales grew 3%, marking the first annual rise since the second quarter of 2008. Earnings were boosted by massive cost cuts as Nokia slashed thousands of jobs last year.
Nokia shares have gained 26% in 2010 prior to Thursday’s results, boosted by strong fourth-quarter results and hopes that its smartphones business was winning back business.
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First Published: Thu, Apr 22 2010. 08 51 PM IST
More Topics: Nokia | Apple Inc. | iPhone | BlackBerry | Symbian |