Nokia slashes sales forecast; stock takes tumble
The Finnish mobile phone maker cuts back on its second-quarter forecast, sending its stock tumbling to a new 13-year low.
Nokia today cut back on its sales forecasts for the second quarter, sending its stock into a nosedive.
The Finnish mobile phone maker is now looking at sales for its Devices & Services division to be "substantially" below its previous estimate of 6.1 billion to 6.6 billion euros ($8.8 billion to $9.5 billion) that it provided in April. Nokia blamed the sinking sales forecast on lower-than-expected average selling prices and mobile device volumes.
Second-quarter operating margins in the same division are also forecast to be "substantially" below the company's previous forecast of 6 percent to 9 percent as a result of sales that will be lower than expected. Nokia is now looking at operating margins to be around the breakeven point.
In announcing the lower forecast, the company pointed to other negative factors. Competition and market trends for mobile devices among a range of prices are affecting Nokia, particularly in China and Europe. The overall mobile phone product mix is trending toward products with lower selling prices and lower gross margins. Finally, Nokia is facing a climate where it's trying to match pricing tactics with its competitors.
News of the sluggish sales forecast took a toll on Nokia's stock, causing it to plummet 15 percent to a new 13-year low, according to Reuters.
Given the new estimate for the second quarter, Nokia is not providing any projections for fiscal 2011 as a whole but said that it will continue to release short-term quarterly forecasts.
The company previously expected sales in the Devices & Services segment for the second and third quarters to remain flat followed by a seasonal uptick in the fourth quarter. Its prior forecast for full-year operating margins called for between 6 percent and 9 percent.
To combat the rough quarters ahead, Nokia said that it's taking "immediate action to address the issues." The company continues to invest in its Symbian range of products and is tweaking prices on its current lineup of smartphones. It's also started shipping new dual-SIM devices last week.
The company added that it's making progress on its new partnership with Microsoft and is confident that the first Nokia device with Windows Phone 7 will ship in the fourth quarter of this year.