Nokia warns of poor performance, withdraws financial targets

Troubled Finnish handset vendor Nokia has said that it will not hit its sales or margin targets for the second quarter of 2011 due to a range of factors impacting negatively on its business. The firm said its difficulties are such that it was “no longer appropriate to provide annual targets for 2011.”

Nokia attributed its problems to “competitive dynamics and market trends across multiple price categories, particularly in China and Europe,” as well as a shift towards lower margin devices and pricing tactics from itself and its competitors.

Nokia is being undercut in the low end, high volume segment of the market by increasingly powerful Chinese manufacturers with far lower cost bases. Meanwhile it is still anonymous in the lucrative smartphone segment, where its partnership with Microsoft has yet to bear fruit. CEO Stephen Elop came close to promising that this situation would change before the year is out, saying: “We have increased confidence that we will ship our first Nokia product with Windows Phone in the fourth quarter 2011.”

It remains to be seen whether this confidence is well placed, but it is certainly out of kilter with Nokia’s wider take on the future. The firm had predicted net sales of devices to be in the range of €6.1bn – €6.6bn for the second quarter of 2011, but said that the reality will be “substantially below” this target. Nokia also said that its operating margin would likely fall from six to nine per cent, with breakeven now the best case scenario.

“Strategy transitions are difficult,” said Elop. “We recognise the need to deliver great mobile products, and therefore we must accelerate the pace of our transition,” he added.