What is Wrong With Nokia?
Nokia certainly knows how to break bad news. They released a press release on Wednesday with the title “Nokia lowers Devices & Services second quarter 2010 outlook and updates the full year 2010 outlook”. What the heck is going on over there?
Reading any of Nokia’s financial reports is a daunting task, so let me break it down for you:
Nokia continues to expect industry mobile device volumes to be up approximately 10% in 2010, compared to 2009 (based on its revised definition of the industry mobile device market applicable beginning in 2010).
The number of phones that are going to ship in 2010 will grow by 10%. This is good.
1. Nokia now expects Devices & Services net sales to be at the lower end of, or slightly below, its previously expected range of EUR 6.7 billion to EUR 7.2 billion for the second quarter 2010. This update is primarily due to lower than previously expected average selling prices and mobile device volumes.
2. Nokia now expects Devices & Services non-IFRS operating margin to be at the lower end of, or slightly below, its previously expected range of 9% to 12% for the second quarter 2010. This update is primarily due to a lower than previously expected gross margin.
3. Nokia now expects its mobile device value market share to be slightly lower in 2010, compared to 2009. This update is primarily due to the competitive situation at the high-end of the market and shifts in product mix. This is an update to our previous target to increase our mobile device value market share slightly in 2010, compared to 2009.
As for Nokia, they’ll be selling less, making a smaller profit, selling less compared to everyone else. Bad, bad, bad.
1. This update is primarily due to lower than previously expected average selling prices and mobile device volumes.
2. This update is primarily due to a lower than previously expected gross margin.
3. This update is primarily due to the competitive situation at the high-end of the market and shifts in product mix.
And now the reasons for the rather poor showing:
Why is Nokia making less money? Because the average selling price (ASP) is dropping. This is either because Nokia is selling more low-end phones or selling less high-end phones. Nokia is also selling less phones to begin with. There’s a ton of explanations for this one, but I’d say better competition all around, especially from Android phones, is mainly responsible.
Why is Nokia’s market share lower this year than last year? Because of a “competitive situation at the high-end”. Now we’re talking. So the reason IS because of the high-end phones, the smartphones, the converging devices. Nokia only released a few smartphones this year:
Nokia X6/X6 16GB
Nokia C5
Nokia C3
Nokia 6700 Slide
The bottom three are not what I’d call high-end. The X6, the best of the bunch, currently clocks in at around $250 USD but originally retailed for $450 USD.
It comes down to one thing: Nokia’s new smartphones can’t compete, and Nokia’s old smartphones can’t compete. And when that happens you start losing customers. Of course, there’s still hope for the N8, C6, and E73 – especially the N8, which ships with Symbian^3, the update to Symbian Fifth Edition.
Related posts:
- What’s Next For Nokia and Location-Based Software
- Nokia’s Q4 2008 Earnings Report: Dismal
- Is a Nokia Touch-Screen Phone Coming to Verizon?