Hit by competition from Apple, Google smartphones.
Nokia Oyj’s second-quarter profit tumbled on competition from Apple’s iPhone. Chief Executive Officer Olli-Pekka Kallasvuo said a new device from the world’s largest mobilephone maker will “kick-start” its comeback.
Nokia, which last month cut its forecast for margins, posted a steeper-than-expected 40 per cent drop in net income to $291.5 million. Analysts had predicted profit of $366 million. Sales rose 0.9 per cent to $12.8 billion. The Espoo, Finland-based company maintained its outlook for margins for 2010.
“A lot of people including us were expecting the worst and while things obviously aren’t great, this may be the eye of the storm,” said Michiel Plakman, who helps manage 7 billion euros including Nokia shares at Rotterdam-based Robeco NV. “I’d expected them to take their full-year guidance down and they didn’t, so that leaves the third and fourth quarters as cliffhangers as well.”
Nokia’s margins have suffered from its failure to bring out a high-end handset to take on Apple’s iPhone. The company cut forecasts twice in three months over delays in finishing the software for the N8, its new flagship handset. Nokia shares have lost two-thirds of their value since the iPhone’s June 2007 introduction, sparking speculation Nokia may seek a new CEO to replace Kallasvuo.
Nokia rose as much as 5.9 per cent, and traded 4 per cent higher at 7.27 euros as of 2:10 pm in Helsinki. The stock has plummeted from 28.60 euros in November 2007. By contrast, Apple’s shares have more than doubled since it unveiled the iPhone in June 2007.
Management
“There are two triggers for the share price,” said Thomas Langer, a Duesseldorf-based analyst of WestLB. “One is the introduction of the new devices which will probably take place at Nokia World in September. And then there’s the big story about potential management change.”
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The Nokia board led by Chairman Jorma Ollila reshuffled managers in May, shifting marketing chief Anssi Vanjoki to lead smartphones and naming a new chief technology officer, former Sun Microsystems executive Rich Green. Investors and analysts said the changes didn’t go far enough and called for Nokia to make bigger alterations such as hiring a CEO who had worked for a competitor and could bring change fast.
CEO Kallasvuo today said speculation on management changes hurts Nokia. “(It) must be brought to an end one way or another,” Kallasvuo said in an interview on CNBC, declining to further comment.
Nokia’s new device
Nokia has struggled to finish the N8, its first phone using a revamped version of the Symbian software platform that has served the company for the past decade. Nokia is streamlining the screens and menus to work faster on touch-screen phones and integrate new features such as television channels.
“The Nokia N8, the first of our Symbian 3 devices, will have a user experience superior to that of any smartphone Nokia has created,” Kallasvuo said in today’s statement. He said there were “further Symbian 3 smartphones that we are confident will give the platform broader appeal and reach, and kick-start Nokia’s fight back at the higher end of the market.”
Nokia’s smartphone market share remained at 41 per cent and its overall market share remained at 33 per cent for the second quarter in a row. The company shipped 111.1 million units, 8 per cent more than last year, and 59 million smartphones, a 44 per cent increase.
Apple, Google
The average selling price for Nokia handset declined to 143 euros for smartphones from 181 euros a year ago. The average for all its phones fell to 61 euros from 64 euros.
Apple shipped 8.4 million iPhones in the most recent quarter, a jump of 74 per cent over last year, and reaped average revenue of $635 per unit including extras.