10 Jun 2011

Nokia expected to swing into loss in Q2, “worst-case scenario is crystallizing”



Nokia, the world's biggest handset maker, has seen its shares nosedive like virtually no other company in the mobile industry. But it's sales that really matter and the general public sees no light at the end of the tunnel at least for the next two quarters. A recent Reuters poll showed that Nokia is expected to swing in the red in the next two quarters and the future is murky at best. 

The fourth quarter of the year is the earliest when the Finns could start recovering and register a profit, but don't expect it to be huge. "We believe the new guidance ... is a strong indication that our worst-case scenario for the company, of accelerating market share and gross margin decline, is crystallizing," Bernstein analyst Pierre Ferragu said recently.

But what's in danger is not just profits – it's the whole idea of a “three-horse race” - a key concept in Nokia CEO Stephen Elop's vision. The ex-Microsoft employee was accused of being a trojan horse for Redmon and purposefully announcing the transition to Windows Phone a whole year before a product could be delivered only to bring down the value of the company. But the reality of Nokia's situation is that the company is in dire straits after dramatically losing both value and customer approval.

Former Nokia employee and industry analyst Tomi Ahonen has mentioned that even the first quarter results of the company were hiding the horrid message about what's to come as while the overall decline in Espoo's market share was only 14%, it was mostly due to seasonal sales in China which celebrates New Year then. Sales were in shambles everywhere except the Asian country and if you factor the Chinese market out, you arrive at a 28% decline in a single quarter.

But even if Nokia survives to release its Windows Phone portfolio, question remains about how the Nokia Windows Phone will be received as initial response to Microsoft's platform in the States was lukewarm. More and more analysts see the only salvation in firing Stephen Elop and changing the course back to Symbian, but the past three months have virtually burned the way back. Do you have any suggestions about what Nokia should do to survive given the latest data? Feel free to discuss them in the comments below!


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