Nokia shares plunge on Q2 profits warning

Shares in Nokia were down 10 percent in US trading yesterday as the world's largest handset vendor issued its second profits warning in less than two months. Nokia said profit margins at its key Devices and Services unit would be at the lower-end of its forecasts, or below, in the second quarter and in 2010, citing tougher competition, particularly at the high-end of the market, and shifts in its product mix toward lower grossing products. It had previously said its operating margin would be in the range of 9 percent to 12 percent in 2Q10. It also now expects net sales at the unit to drop to the lower end, or slightly below, the predicted figure of EUR6.7 billion to EUR7.2 billion for Q2. It stated that the reason for the revision was a drop in the predicted volume of sales for mobile devices and lower than expected average selling prices. Nokia also said it expected its share of the global mobile devices market in terms of value to fall this year, when it previously had targeted a slight increase year-on-year. According to a Reuters report, Nokia shares fell to their lowest level since March 2009 in response to the news. Its shares have dropped around 20 percent so far this year.

"Investors are worried about Nokia's long-term market position. Nokia loses market shares at the high-end, the mix worsens and margins go down. At the high-end, Nokia loses mainly against Apple," Inge Heydorn, asset manager at Sentat Asset Management, told Reuters. The news agency notes that the second profit warning in as many months will pile further pressure on Nokia's CEO Olli-Pekka Kallasvuo (pictured), who has been heavily criticised by shareholders. Kallasvuo is under fire as Nokia's share price has missed the market recovery and the company has not been able to build a formidable rival to the iPhone in more than three years. "Nokia has, considering the competition, one of its weakest product portfolios ever," said Swedbank analyst Jari Honko. Nokia will provide its Q2 results and more detail on its 2010 full year outlook when it announces its Q2 results on 22 July.

Source: All About Mobile Phones