Nokia Corp saw its share price plummet 14 percent after it warned that heavy competition would hit its first-quarter earnings, especially in developing markets, and that it expected no improvement in the second quarter.
The world’s largest cellphone maker said multiple factors had hurt sales, particularly in the fast-growing markets of India, the Middle East and Africa and China.
The Finnish firm has increasingly been losing out to competitors in the lucrative top-end smartphone sector, against Apple Inc’s iPhone and brands using Google Inc’s popular Android software, including Samsung Electronics Co. However, it has also been squeezed in the low end by Asian manufacturers making cheaper phones, such as China’s ZTE Corp (中興).
Nokia said on Wednesday that operating margins in the first quarter were “approximately negative 3 percent.” Previously, it had expected them “around break-even, ranging either above or below by approximately 2 percentage points.”
It said it sold 71 million mobile phones in the quarter — down from 108 million in the same period last year — with net sales of 2.3 billion euros (US$3 billion), while smartphone sales halved to 12 million units from a year earlier.
The profit warning was coupled by other bad news from the cellphone maker, which acknowledged a data connection problem with the Lumia 900 just two days after a high-profile launch in Times Square in New York and elsewhere in the US.
Nokia said it would compensate US Lumia 900 users with US$100 in credit at AT&T because of the software problem, as well as providing an updated Lumia 900.
Wednesday’s news spooked investors, who sent Nokia’s share price down more than 14 percent to close at 3.27 euros on the Helsinki Stock Exchange.
CEO Stephen Elop described the performance as “disappointing” for the company that had pinned hopes on posing a new challenge against chief rivals with new Windows-based Lumia smartphones, first launched in Europe in November and later in the US and China.
“Our devices and services business continues to be in the midst of transition,” Elop said. “Within our smart devices business unit, we have established early momentum with Lumia, and we are increasing our investments in Lumia to achieve market success.”
In the first quarter, Nokia said it sold more than 2 million Lumia phones at an average price of 220 euros. On Wednesday it unveiled a new version of the Lumia 610 that will give customers near field communication technology, or NFC, allowing users make payments at adapted sales tills and exchange data with handsets with similar technology.
Elop also told analysts that Nokia would launch new products in the second quarter, take “tactical pricing actions in the near term” and would speed cost-cutting measures and “pursue significant structural actions if and when necessary.”
Earlier this year, Nokia announced 4,000 job cuts — on top of 10,000 last year — and said it would stop assembling cellphones in Europe by next year as it shifts production to Asia, where the majority of component suppliers are based, to cut costs and help it reach markets faster.