The world’s biggest mobile handset maker, Nokia Corp., has made heavy losses in the Q1. Nokia says that it has faced much greater than expected competition and challenges in its ongoing strategy revamp.
Stephen Elop, Nokia's Chief Executive said, “We are navigating through a significant company transition in an industry environment that continues to evolve and shift quickly. Over the last year we have made progress on our new strategy, but we have faced greater than expected competitive challenges”.
Nokia is believed to be missing analysts' expectations
Nokia Corp said, “We are operating loss for the three months to March 31 totaled €1.34 billion, from a €439 million operating profit a year ago, missing analysts' expectations for a €731 million loss by a wide margin”. Net loss grew to €929 million from a €344 million net profit for the Q1 last year, going against expectations for a €554 million loss. Revenue dropped 29 percent to €7.35 billion.
Nokia Corp has been struggling over recent years to compete in Western markets against Apple Inc.'s iPhone and smartphones from Asian manufacturers like Samsung Electronics Co. Ltd and HTC Corp. Now the Finnish company's dominance in developing markets is declining.
In the Middle East, Asia-Pacific and Africa, there has been an increasing gush of cheap smart phones and consumers are avoiding basic Nokia phones in this competition. Hence this competition is strongly affecting the Nokia Corp. Google Inc.'s Android mobile phone software has stolen what Nokia was providing and the Internet giant provides these apps free of charge to handset makers.
Intense competition hit Nokia’s performance
Intense competition in fast-growing emerging markets, warned by Nokia last week, would hit its performance in the first half of this year. It undergoes a major strategy refurbishment
Nokia is dumping its in-house phone operating software, Symbian, now considered by many to be clunky and old-fashioned, and is switching to Microsoft Corp.'s new Windows Phone software for its mobile handsets. Nokia's Q1 operating margin at its largest Devices & Services unit was a negative 5.2%. Nokia said it expects the Q2 to be similar to, or below, the first quarter level.
Nokia also lay off nearly 14,000 employees last year as it plans to cut €1 billion from its operating costs by 2013. It hasn't ruled out further cuts and on Thursday said it plans to accelerate and substantially deepen cost savings for its Devices & Services unit and will give further details soon. Nokia Corp also said that it shipped 82.7 million devices in total in Q1, down from 108.5 million devices in Q1 last year.
Nokia's shares have dropped nearly 60 percent since the company announced its transition from Symbian to Windows Phone in February last year. Nokia is now Finland's second-largest company by market capitalization.
Its smartphone shipments, which include its old range of Symbian devices as well as its new Windows-powered Lumia range, were at 11.9 million, down from 24.2 million a year ago. Average selling prices for smartphones declined 2 percent year-on-year to €143, while average prices for basic phones were at €33, down from €40 a year ago.