Nokia Issues Profits Warning on Weaker Than Expected Handset Sales

Nokia has issued a warning that its Devices & Services division will post a financial loss for the first-quarter of this year. Nokia says that during the first quarter 2012, multiple factors negatively affected its Devices & Services business to a greater extent than previously expected.
The company said that competitive industry dynamics, negatively affected net sales in the Mobile Phones and Smart Devices business units, particularly in India, the Middle East and Africa and China; and there were gross margin declines, particularly in the Smart Devices business unit.
Nokia currently estimates that its Devices & Services operating margin in the first quarter 2012 was approximately a loss of 3 percent – compared to previous guidance that it would break even.
The forecast has also been extended into the second quarter of this year, and the company said that it may be even worse.
“Our disappointing Devices & Services first quarter 2012 financial results and outlook for the second quarter 2012 illustrates that our Devices & Services business continues to be in the midst of transition,” said Stephen Elop, President and CEO of Nokia. “Within our Smart Devices business unit, we have established early momentum with Lumia, and we are increasing our investments in Lumia to achieve market success. Our operator and distributor partners are providing solid support for Windows Phone as a third ecosystem, as evidenced most recently by the launch of the Lumia 900 by AT&T in the United States.”
Nokia currently estimates that Devices & Services net sales in the first quarter 2012 were EUR 4.2 billion, comprised of Mobile Phones net sales of EUR 2.3 billion (71 million units), Smart Devices net sales of EUR 1.7 billion (12 million units), and Devices & Services Other net sales of EUR 0.2 billion.
Based on the preliminary view, Nokia ended the first quarter 2012 around the high end of its normal 4 to 6 week channel inventory range, but on an absolute unit basis, channel inventories declined sequentially.
In the first quarter 2012, Nokia sold more than 2 million Lumia devices at an average selling price of approximately EUR 220 (reported within the Smart Devices business unit). Furthermore, Nokia has seen sequential growth in Lumia device activations every month since starting sales of Lumia devices in November 2011.
“We are continuing to increase the clock speed of the company,” said Stephen Elop, President and CEO of Nokia. “The change is tangible, and we are proud of the way Nokia employees are quickly responding to the needs of consumers and partners.”
Nokia will provide full first quarter results and more details when it reports its first quarter 2012 results on April 19, 2012.
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