Nokia today adjusted its second-quarter and full-year guidance, citing “multiple factors” that will negatively impact the company’s Devices & Services business to a greater extent than previously expected.
In press release, the company said that increasing competition across price points, a product mix shift towards devices with lower average selling prices and lower gross margins and pricing tactics by Nokia and certain competitors will lead to lower sales for the second quarter.
Nokia expects Devices & Services net sales to be substantially below its previously expected range of $8.7 billion to $9.5 billion for the second quarter of 2011. The update is primarily due to lower than expected average selling prices (ASP) and mobile device volumes.
Additionally, the company said that it now expects Devices & Services non-IFRS operating margin to be substantially below its previously expected range of 6 percent to 9 percent for the second quarter. This update is primarily due to lower than previously expected net sales.
Nokia has struggled to come up with a new mobile strategy in recent months. Under the new leadership of CEO Stephen Elop, the company has adopted Microsoft’s Windows Phone 7 operating system for its future high-end smartphones.
According to a statement by Elop, the company still expects to deliver on its first WP7 handset by the fourth quarter of this year. “Strategy transitions are difficult. We recognize the need to deliver great mobile products, and therefore we must accelerate the pace of our transition,” he said. “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.”
After the transition to WP7, Nokia continues to target Devices & Services net sales to grow faster than the market, pegging operating margin to be 10 percent or more.
Nokia said given the unexpected nature of the changes in its outlook, it would not provide any further guidance for 2011. However, the company 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 will continue to invest in bringing new features to its Symbian line up and “has taken price actions on its current smartphone portfolio,” intensifying its focus on retail marketing.
Shares of Nokia dropped almost 13 percent in early morning trading to $7.07. The company will provide its second-quarter results and more details when it reports on July 21.