Nokia Profit Falls 40% as Apple IPhone Competition Intensifies
By Diana ben-Aaron
July 22 (Bloomberg) -- Nokia Oyj, the world’s biggest maker of mobile phones, posted a steeper-than-expected 40 percent drop in second-quarter profit on competition from Apple Inc.’s iPhone and devices based on Google Inc.’s Android software.
Net income fell to 227 million euros ($291 million), or 6 cents a share, from 380 million euros, or 10 cents, a year earlier, after Nokia last month cut forecasts for the period’s revenue and margins. Analysts had predicted profit of 285 million euros, according to the average estimates in a Bloomberg survey. Sales rose 0.9 percent to 10 billion euros, the Espoo, Finland-based company said in a statement today.
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 chief executive officer to replace Olli-Pekka Kallasvuo.
“Nokia needs major strategic changes to resolve its issues, which could take six to 12 months to put in place,” Morgan Stanley analyst Patrick Standaert wrote in a July 21 report, reiterating an “underweight” rating on the shares. “Doing more of the same could see device margins in the mid- single-digits, implying a 4 euro share price or another 40 percent downside.”
Nokia fell as much as 24 cents, or 3.4 percent, to 6.75 euros. The shares were up 0.6 percent to 7.03 euros at 1:14 p.m. 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.
Market Share
Apple this week reported a 78 percent jump in profit in the three months ended June 26 to $3.25 billion, beating analysts’ estimates, as customers flocked to the iPad tablet computer and the latest version of the iPhone. Sales surged 61 percent.
Smartphone sales grew 49 percent in the first quarter, according to industry researcher Gartner Inc., with Nokia’s Symbian phones declining by more than 4 percentage points as Apple and Google’s Android operating system gained.
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 have 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.
Nokia has struggled to finish to 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.
To contact the reporter on this story: Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net |
