Nokia Misses Smartphone Boom as Customers Flock to
iPhone 4
As Apple Inc struggles to meet demand for the latest version
of the iPhone, Nokia Oyj is still waiting to ship its only
model that may compete.
The Finnish company has announced just one handset, the N8,
from its new high-end line based on revamped Symbian
3 software, while Apple’s recently unveiled iPhone 4 is flying
off virtual shelves with 600,000 pre-orders and other vendors
are rolling out models with Google Inc’s Android software.
“The smartphone revolution has started and Nokia is
not there,” said Helena Nordman-Knutson, a
Stockholm-based analyst at Oehman. The N8 “will be old when
it’s out because everybody has taken the next step.”
The world’s largest mobile-phone maker Wednesday
lowered revenue and margin forecasts, citing competition in
the highend smartphone market and showing that its fortunes in
the application-rich iPhone segment may not turn before
2011. Chief Executive Officer Olli-Pekka Kallasvuo has
struggled to deliver on a touchscreen model on a par with the
Apple device.
Nokia said in April that the N8 will be shipped sometime in
the third quarter. It is also slated to introduce a second
line of high-end devices running the MeeGo operating system
developed with Intel Corp at an unspecified date this
year.
Investors punished Nokia, sending its shares down 9 per
cent to EUR7.22 in Helsinki Wednesday, the lowest level
since March 9, 2009. The stock drop put the market value of
Nokia at EUR27 billion (US$33.3 billion), below the US$34.4
billion of rival Research In Motion Ltd and Apple’s US$240
billion.
Margin Forecasts
Nokia Wednesday said its second-quarter handset revenue and
margins would be “at the lower end of or slightly below”
its earlier forecast range of 9-12 per cent. The Espoo,
Finland-based company also cut its outlook for 2010 for the
second time this year. The full-year adjusted operating margin
in handsets could come in below the 11-13 per cent range
forecast earlier, mainly because of its weakness in high-end
smartphones, it said.
Sales in the devices and services division may fall
below EUR6.7 billion in the second quarter, Nokia said.
The lowered outlook is “an implicit statement that the
Symbian user experience would not be fixed this year and
MeeGo would not arrive in time to make a difference to 2010
either,” Gartner Inc analyst, Nick Jones, said in e-mailed
comments.
‘Out of Patience’
The less-than-perfect implementation of the company’s
strategy might prompt calls for management changes, Jones
said. “It’s looking now as if 2010 won’t be the year in which
Nokia’s problems get fixed and I suspect investors are running
out of patience and will want to hold someone accountable,” he
said. “That makes me wonder if the recent reorganisation may
not be the last of the executive changes we’ll see in
2010.”
The company never comments on speculation, said
Nokia spokeswoman Arja Suominen. On May 11, Nokia said it
was promoting Anssi Vanjoki, a 20-year company veteran, to
head a new smartphone division.
Nokia’s outlook showed that the company’s fortunes are
not likely to change in the immediate future, analysts said.
“What this did is crystallise people’s awareness that the
portfolio in the third quarter is not going to be that much
better than in the second,” said Stuart Jeffrey, an analyst at
Nomura Securities. “So it’s all or nothing in the fourth
quarter.”
The company expects the fourth-quarter margin to rise
above the average for the year, Chief Financial Officer Timo
Ihamuotila said in a teleconference Wednesday.
Not About Volumes
“The smartphone unit is in trouble and has been for
basically two years now,” said Tero Kuittinen, an analyst at
MKM Partners. “The question is whether they can stabilise the
situation there and I think they have a shot at doing it in
the second half of the year.”
Nokia held on to its smartphone market share of 41 per cent
in the first quarter as it introduced cheaper models and
trimmed prices. It expects its share of industry handset
revenue to decline this year, after earlier saying it would
increase. It still expects unit market share to be flat.
“It’s not about volumes anymore ‒ the competition is
taking place over the money,” Nordman-Knutson said. “Of
course, you can take market share by redefining the
smartphone segment and adding volume through massive price
reductions.”
The market share of Symbian, Nokia’s main smartphone
operating system, fell to 44.3 per cent in the first quarter
from 48.8 per cent a year ago, according to market researcher,
Gartner. Although mostly on Nokia phones, Symbian is also used
by Samsung Electronics Co and Sony Ericsson. The
iPhone’s share rose to 15.4 per cent from 10.5 per cent, while
Android soared to 9.6 per cent from 1.6 per cent.
Not ‘Fully Baked’
The N8 will enter the market at EUR370 (US$443), lower
than the EUR550 price tag of the N97, last year’s flagship
device. The company has unveiled low-end smartphones costing
as little as EUR135 this year.
CFO Ihamuotila said that the company is aiming for
multiple Symbian 3 products in the second half, not just the
N8. Nokia allowed some handset reviewers to demo the N8
at events in London and Singapore this week. The events
were followed by a spate of blog posts on the device.
“Nokia has put together a growling multimedia
powerhouse, but the OS is so far from being fully baked; we
can still see the dough,” Engadget, a closely followed blog
said.
SlashGear, another popular blog, said the device
was “decently peppy,” adding that it “isn’t perfect yet.”
“It doesn’t mean Nokia will never come back, but it does
say they will not come back in 2010 or not before the fourth
quarter,” said Nordman-Knutson. “We can’t expect one
single phone to change the world for them.”