Nokia declines to give further full-year guidance as Q2 sales forecasts collapse

Nokia has commented on factors impacting its business and updated its second quarter and full year 2011 outlook for Devices & Services. The handset manufacturer commented that during the second quarter 2011, multiple factors are negatively impacting Nokia’s Devices & Services business to a greater extent than previously expected. These factors include:

– the competitive dynamics and market trends across multiple price categories, particularly in China and Europe;
– a product mix shift towards devices with lower average selling prices and lower gross margins; and
– pricing tactics by Nokia and certain competitors.

Updated outlook for Devices & Services for the second quarter 2011:
– Nokia now expects Devices & Services net sales to be substantially below its previously expected range of €6.1 billion to (US$8.8 billion) €6.6 billion for the second quarter 2011. This update is primarily due to lower than previously expected average selling prices and mobile device volumes.
– Nokia now expects Devices & Services non-IFRS operating margin to be substantially below its previously expected range of 6 per cent to 9 per cent for the second quarter 2011. This update is primarily due to lower than previously expected net sales. While visibility is very limited, Nokia’s current view is that second quarter 2011 Devices & Services non-IFRS operating margin could be around breakeven.

Updated outlook for Devices & Services for the full year 2011:
– Given the unexpected change in our outlook for the second quarter, Nokia believes it is no longer appropriate to provide annual targets for 2011. However, Nokia expects to continue to provide short-term quarterly forecasts in its interim reports as well as annual targets when circumstances allow it to do so.
– Nokia’s previous targets for the third quarter, fourth quarter, and full year 2011 were: 1) net sales in Devices & Services to be at approximately the same level in the third quarter 2011 as in the second quarter 2011, and seasonally higher in the fourth quarter 2011, compared to the third quarter 2011; 2) Devices & Services non-IFRS operating margin to be between 6 per cent and 9 per cent in 2011. These targets are no longer valid.

Nokia is taking immediate action to address the issues that are impacting its Devices & Services business. Nokia’s high-level strategic objectives and targets remain unchanged.

– Nokia is continuing to invest to bring new innovative capabilities to its Symbian line up. In addition, Nokia has taken price actions on its current smartphone portfolio, and Nokia is intensifying its focus on retail point-of-sales marketing.
– Nokia started shipping its new dual-SIM devices.
– Nokia remains pleased with its progress on its Windows Phone strategy, and has increased confidence that the first Nokia product with Windows Phone will ship in the fourth quarter 2011.

“Strategy transitions are difficult. We recognise the need to deliver great mobile products, and therefore we must accelerate the pace of our transition,” said Stephen Elop, president and CEO of Nokia. “Our teams are aligned, and we have increased confidence that we will ship our first Nokia product with Windows Phone in the fourth quarter 2011.”