Nokia result: the outlook is gloomy

The days when Nokia had 40% of the handset market and 20% operating profit margins won't return, is one analyst viewpoint following its latest financial result, in which profit fell by two-thirds.

This gloomy perspective on the future of Nokia was echoed by many others as they cut the shares from ‘buy' to ‘neutral', triggering the share price to fall the most in five years as the guidance for the second half of 2009 was ‘significantly weaker-than-expected'.

Nokia's product portfolio also came in for criticism compared with the strategy adopted by Apple. According to Mark McKechnie, of Broadpoint Amtech, the company now has multiple smart-phone lines like the E Series and N Series, as well as music phones.

This approach makes it difficult to attract software developers, who prefer to write programs for a single platform with a large user base such as the iPhone than tailor their applications for a variety of handsets. “They do need to figure something out to keep themselves relevant for users,” said McKechnie.

An indication of the problem Nokia faces came with the announcement from CEO, Olli-Pekka Kallasvuo, that the company had shipped 500,000 of its flagship N97 smartphones in June.

However, Apple was able to state that it had sold more than 1 million units of its latest model, the iPhone 3G S, in the first three days of its debut last month.

“Nokia needs to get a better user interface on their devices, and they need to do that very soon,” said Carolina Milanesi, a senior Gartner analyst.

Another sector where Nokia is playing catch-up is with its Ovi Store. The company's VP of services, Tero Ojanperä, said the company would make two new announcements on September 2 about development tools and would begin a major marketing push for the site.

“We will be kicking in for the Ovi Store to get a bigger marketing push,” he said. “This includes integrated billing with 27 operators and localizing it in five languages. We've made good progress but have small details to iron out before the big push.”

With Nokia admitting that it had lost overall market share in Latin America, the Asia-Pacific region and North America from a year earlier, Colin Gillis, a senior analyst at Brigantine Advisors, said “this is a very tough spot for Nokia to be in right now. They're going to need the types of devices that people can use to download applications and the kind of devices that people can be interactive with, the types of devices we're seeing out of Apple.”

For more on this story:
Bloomberg 1 and Bloomberg 2

This article originally appeared in FierceWireless Europe

 

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