Nokia lowers financial expectations for 2010

So here I am all excited and pleased with the T-Mobile Nokia E73 Mode and then I see news from Nokia that they are lowering expectations for second quarter 2010 and full year outlook predictions. As a publicly traded company, it seems that Nokia needs to keep shareholders updated with the situation so there are no real surprises at the end of financial periods. Nokia stated that several factors are negatively impacting their Devices & Services business more than expected. These factors include:

  • the competitive environment, especially at the high end
  • shift towards lower gross margin products
  • depreciation of the Euro affecting cost of goods sold, expenses, and global pricing tactics

Nokia will still have net sales in the range of EUR 7 billion, but they expect their mobile device market share to remain flat in 2010. Actually, remaining flat is pretty impressive given that Palm’s webOS, Apple iOS, and Google’s Android OS are much flashier with many more high end devices available. Given that Nokia is reducing the number of devices it launches, is in a transitional period as it moves to the Symbian^3 (and higher) operating system, and is killing off Maemo and transitioning to Meego it really is no surprise that they would be flat in 2010. The last flagship device they launched, the Nokia N97, was about a year late and had software and hardware issues that kept it from being as good as it should have been. The Nokia N8 will be the next major device, but that will launch a bit later in 2010 and probably have little effect on this year’s financials.

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8 Comments to Nokia lowers financial expectations for 2010

jb8967
June 17, 2010

I was a bit surprised by the announcement considering this is the second negative warning in a row. Nokia’s has a real problem “connecting” with analysts. I personally have little faith in the CEO as a front man for the company. His message delivery for the first time on CNBC was abysmal. The Nokia US business has no clue how to sell, as well. I commented on a Phonedog review simply because so many key strengths of the N8 weren’t mentioned by the reviewer, Noah. His response, in part, was that Nokia PR failed to mention these points to him. In fact, Nokia videos explaining why a larger camera sensor is more important than excessive pixels was drowned out while Apple got credit as the first to highlight this strength on its iPhone 4 at the WWDC. Phonedog response…Apple PR team said it first to Phonedog. Well, this shows a serious issue. If Nokia cannot connect with analysts…how the heck can they expect to connect to people. A lawyer for CEO, product managers as public spokespersons…result…poor delivery. Nokia needs to up its game on this front…it’s not just an issue for the US market anymore.

matt
June 17, 2010

I wrote to Nokia a few times over the last couple years explaining to them that if they truly wanted to open the doors to the U.S., they needed to advertise more. In Europe, where Nokia reigns, advertising might not seem important, but just look at Apple and Android market share here. The American market is where Nokia can really shine, but we have a few problems. The American market doesn’t have cellular service plans and devices set up like Europe (T-Mobile is getting there). Everyone buys a phone based on its subsidized price. No one wants to pay more for an unlocked phone and jump from carrier to carrier (instead, sticking to a contract). Nokia needs to understand that people love to see what the device can do i.e commercial spots, viral videos, and even billboard advertising. The N900 viral videos were good, but we all know that device wasn’t meant for the mainstream market. Now that Apple and Android have been successful, especially being only a few years old, Nokia has a serious problem when it comes to the world market. It’s not just customers Nokia has to worry about. It’s the investors.

Charles in Canada
June 17, 2010

Case in point: Nokia does not sell any of its phones in Canada other than through carriers and they carry very few of Nokia’s phones. By contrast, all major Canadian carriers offer iPhones AND Apple sells them UNLOCKED directly from their Canadian web site!

Nokia’s Canadian web site does not even list a cell phone if it is not available from a Canadian carrier (for example the N900 is not listed). And Nokia’s US website will not ship to Canada.

Wind Mobile (a relatively new Canadian carrier, but with huge financial backing) tried to carry the N900, but negotiations failed.

To my knowledge, there is no technical, legal or regulatory reason for Nokia not to sell in Canada, a market where their high-end phones would probably sell well; this leads me to suspect that Nokia is simply unwilling to do business here.

Of all the cell phones I have used in the past 10 years, Nokia’s were and still are the best and Meego is the most attractive mobile OS to me (and I would LOVE to own an N900, I even contacted Nokia to buy one and was turned down). But from a business standpoint, I have to bet against Nokia – until there are drastic changes in the way it markets and sells its products.

Charles in Canada
June 17, 2010

Matt,

Contrary to most Americans, I would gladly buy a high-end phone with little or no subsidy – and be free to choose my carrier, including when I visit the States on business or on vacation (roaming charges are simply insane).

Where I live, I have access to 4 different GSM/3G+ carriers and 6 additional service providers riding on these networks.

To me, a smartphone is first and foremost my life organizer – my portable Outlook. Everything else (mp3 player, GPS, games, camera, browser and phone) is secondary.

matt
June 18, 2010

@Charles in Canada – The difficulty is educating people between the two. Personally, I love the idea of buying a phone (like buying a computer), and putting any application I want on it, without limitations, and then getting the service I want. This brings on competition on the device front. Companies can make the device they want, without limitations (no bloatware on devices that are subsidized e.g. e71x on AT&T). It potentially can bring more competition on the networks. More networks competing to get more users based off of network coverage, not the phones on the network. At least that is my idea of an ideal mobile tech world. Now with the Nokia N8, with support for T-Mo USA and AT&T, I will at least have the ability to get 3G speeds on both networks.

Charles in Canada
June 20, 2010

@Matt – The mobile device world is in a period of exploding growth. New processors (Intel’s Moorestown and Arm’s A9) will bring to mobile devices more power and better graphics than current netbooks. In the next 12 months, we will likely see a growing diversity of devices and the diversity will be in form factors, functionality, capacity, ease-of-use etc. Will carriers offer them all? Will the device you want be available from any of the carriers in your region, let alone the carrier you want?

The more complex the device, the less it makes sense to buy it from a carrier (who would think of going to an ISP to buy a PC? ..and then having the PC locked to that ISP?) Yet, high-end mobile devices retail for the same price as medium-range laptops!!!

For the above reasons, I believe the retail distribution model for mobile devices is not sustainable and needs fixing. I much rather buy my device at an independent retailer (Best-Buy etc,) that competes with other retailers for my business, and then choose the most appropriate carrier who also competes with other carriers for my business…

cam
June 20, 2010

man its looking bad for nokia, i have an n85 and think its the best phone…shoed it to my friends they were like cool but no wow…all friends have android. thing is hen android/rim /whoever compared to mine, there isn’t much they can do..apps are cool but its a gimmick…i have many jar games and apps, themes…not to mention great battery life and the long coveted but touted as a first video call via secondary camera….nokia does need to advertise but i dont understand why…it seems like nokia is dependednt on its loyalist in which case if you have a nokia you’e happy but…this could all come crash down….another note android is evolving way too rapidly for its own good..there will be another entry in the mobile os …i thin microsoft may corner the market simply becuase if you by an android phone today..i guarantee befoe the week is out, your phone will be ancient…and thats not consumer friendly

matt
June 20, 2010

@Charles in Canada – I 100% agree with you. I haven’t bought one device from a carrier. They have always been unlocked. Until the public gets educated though, there will always be the “sheep” going to the carrier for the “cheaper” device. For the majority of consumers, the way the device is marketed, really seems to affect the sales.


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