Nokia cuts industry forecasts a second time

The world’s biggest handset vendor shook the market on Thursday, with news that the industry might be in worse shape than first thought.

Finnish gadget manufacturer Nokia lowered its fourth quarter forecasts for device industry volumes for the second time in a month, and reiterated its expectations that number will also be down in 2009.

At the company’s capital markets day in New York, Nokia president and CEO, Olli-Pekka Kallasvuo, warned that the mobile device market slowdown has continued more rapidly than previously expected.

Nokia now estimates that fourth quarter 2008 industry mobile device volumes will be lower than the previous estimate of approximately 330 million units, which would result in full year 2008 industry mobile device volumes below the earlier estimate of 1.24 billion units.

The company also said it is unable to confirm expectations that its handset market share will remain at 38 per cent as it was in the third quarter.

In 2009, operator and retail distribution channels are expected to go through a period of destocking, resulting in lower sales volumes by manufacturers than purchase volumes by consumers during the first half of next year.

Nokia expects 2009 industry mobile device volumes to decline 5 per cent or more from 2008 levels. Moreover, the four billion mobile subscriptions mark is now expected to be reached in the first quarter 2009, rather than the end of 2008.

With handset volumes on the decline, Nokia will increase its focus on sevices, particularly the areas of music, maps, media, messaging and gaming. Nokia is targets services and software net sales of Eur2bn or more in 2011, and expects to have 300 million unique services users by 2012.

In the infrastructure space, Nokia Siemens Networks said it continues to expect the mobile infrastructure, fixed infrastructure and related services market to be flat in euro terms in 2008, compared to 2007. The networks unit is still on track to achieve substantially all of the Eur2bn of targeted annual cost synergies by the end of 2008.