Nokia Oyj may tomorrow predict further declines in handset sales, potentially eating into cash reserves as the Finnish company struggles to compete against smartphones using Google Inc’s Android software.
Nokia, the biggest maker of mobile phones by volume, may sell as few as 90 million handsets this quarter, driven by a slump in low-end feature phones, said Andy Perkins, a London- based analyst at Societe Generale. Second-quarter shipments probably declined 14 per cent to 96 million phones, according to the average estimate of 29 analysts surveyed by Bloomberg.
Except for a recession-related dip in early 2009, Nokia hasn’t shipped fewer than 100 million phones in a quarter for the past four years. The shrinkage means Nokia may start to use part of its euro 6.4 billion ($9 billion) in net cash and liquid assets while the company seeks to revive its unprofitable Nokia Siemens Networks venture, said Tero Kuittinen, an analyst at Greenwich, Connecticut-based MKM Partners.
“The fear is that they’ll guide third-quarter shipments below 90 million which means they could start burning cash at a rapid clip,” Kuittinen said in a phone interview. “Nokia is geared to maintaining its manufacturing and distribution footprint at 100 million phones a quarter and it’s difficult to scale that down rapidly.”
Doug Dawson, a spokesman for Espoo, Finland-based Nokia, declined to comment before the company’s earnings release, scheduled for 1 pm local time tomorrow.
Nokia rose 1.3 per cent to euro 3.94 at 10.31 am in Helsinki. The stock has declined 49 per cent this year.
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‘COLLAPSING’
Global sales of mid-range and low-end feature phones are “collapsing,” while smartphones based on Android are healthy, Bert Nordberg, chief executive officer of Sony Ericsson Mobile Communications AB, said last week in an interview. Nokia chose Microsoft Corp’s Windows Phone over Android because it offered the chance to help build a new market segment.
The handset maker, which consolidates Nokia Siemens in its results, may report a second-quarter net loss of euro 48 million, according to the average of 22 analyst estimates. The loss for the third quarter may reach euro 192 million, the average of 13 estimates.
Second-quarter revenue may have fallen 7.3 per cent to euro 9.27 billion, while the average selling price dipped 5.7 per cent to euro 57.5, the estimates show.
“There is no floor in the sales guidance and that’s very alarming — there is nothing we can lean on,” said Mats Nystroem, an analyst at SEB Enskilda in Stockholm who recommends selling Nokia shares. The erosion of Nokia’s cash would be an “alarming trend” for valuation and dividend payments, he said.
WINDOWS PHONES
Chief Executive Officer Stephen Elop, said in February that Nokia is retiring its Symbian operating system in favor of Windows Phone. The move may have accelerated the flight of Symbian users to Android, which overtook Symbian in the first quarter as the most popular mobile-phone software. The first Nokia handsets with the Microsoft system are scheduled for the fourth quarter.
The company’s reported market share for smartphones slipped to 26 per cent in the first quarter from 41 per cent in the second quarter of last year. Elop, who joined from Microsoft in September, has announced 5,800 job cuts, or about 10 per cent of the handset-related workforce, and arranged more than 3,000 transfers as he scrapped products that he judged wouldn’t sell against Apple Inc’s iPhone and Google handsets, and spun off non-core units.
Cupertino, California-based Apple said yesterday its third- quarter profit more than doubled to $7.31 billion, topping estimates, lifted by record sales of iPhones and iPad tablets.
LAST SYMBIAN PHONES
Nokia last month announced the N9, a high-end handset that will be the last device in the Linux-based product line the company has developed alongside Symbian since 2005. The handset, designed by Marko Ahtisaari, the son of former Finnish President and Nobel Peace Prize laureate Martti Ahtisaari, would be a test of hardware and features that will appear in Windows Phones.
Nokia continues to introduce new Symbian devices, promising 10 more this year despite a rapid falloff in operator and public enthusiasm. Price cuts are already being reported on the E6 handset, introduced in May. Elop has a goal of selling 150 million more handsets on the last versions of Symbian.
“Any possible positive trigger or fundamental change driver relates to the Windows Phones, which are unlikely to ship in significant volumes before the first quarter if not the second,” Nystroem said.