Nokia builds on its track record - of stumbling

Stock market analysts have given Nokia a good kicking following disappointing Q1 results. Having worked themselves into believing that Nokia had started to recover, the company then abruptly punctured the expectations of financial pundits and reported Q1 sales of €9.5 billion, up 3 per cent from a year ago, but down a massive 21 per cent from Q4.

More importantly for these industry watchers, Nokia missed the consensus opinion that sales would be €9.8 billion, and posted a net profit of €349 million, again below the anticipated €370 million.

But perhaps these analysts should be accustomed to being either disappointed or overjoyed with Nokia's quarterly results, given that the past four earnings updates from Nokia have triggered a 10 per cent or so rise or fall in its share price. OK, this time the share price plunged by 12 per cent, or around a seventh of its market value.

Altogether, a somewhat worrying picture for Nokia which has now lowered its gross and operating margins for Q2, albeit that it still expects to see the overall handset market growing by 10 per cent in units in 2010, and also anticipates maintaining its current market share.

Adding further worry to its future success, Nokia CEO, Olli-Pekka Kallasvuo, announced that the much anticipated availability of its new Symbian^3 operating system would be delayed until Q3, and that Symbian^4 would be pushed into 2011.

Kallasvuo said Symbian^3 was a catch-up product, but represented most of the "heavy lifting" needed to compete with the iPhone and Android phones. In an attempt to soothe the financial markets, the CEO said that operators--which had access to other phone makers' handset roadmaps--had given Symbian^3 high marks and were extremely positive. However, hinting at reasons behind the delay, Kallasvuo said that it was "in everyone's interest" to get the quality right.

The company's continued inability to compete with Apple's, and increasingly Google's, success in the high-margin smartphone arena should have set alarm bells ringing throughout Nokia--for it to now delay its Symbian^3 "catch up" operating system management are facing a near catastrophe.

Perhaps Nokia's future is in the low-cost volume market, which, according to Credit Suisse forecasts, will account for 70 per cent of handset demand by 2015.-Paul