Nokia (NYSE:NOK) slashed its forecast for its key devices and services business for the second quarter, warning that net sales will be "substantially below" its current forecast. The company, which is switching to Microsoft's (NASDAQ:MSFT) Windows Phone as its primary smartphone platform, had previously indicated that 2011 and 2012 would be transitional years financially.
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The handset maker said sales will fall below its previous guidance of $8.78 billion to $9.36 billion, though it did not give a new sales range. Additionally, Nokia said its operating margin for the unit will fall below the 6 percent to 9 percent range it had previously given, and said margins could be around breakeven. Nokia blamed a variety of factors on the cut in guidance, including the competitive dynamics, particularly in China and Europe, lower average selling prices in its product mix and pricing tactics by Nokia and its competitors.
Additionally, Nokia said that, given the changes in its second-quarter guidance, the company will no longer provide full-year targets. However, Nokia said it expects to continue to provide short-term quarterly forecasts as well as annual targets when circumstances allow it to do so.
Nokia said it was taking steps to rectify the issues hurting its devices and services business, including bringing new capabilities to the Symbian platform and intensifying its focus on retail point-of-sales marketing. Nokia said it still intends to make its previously announced cost cuts in the devices and services business. Additionally, the company said it had more confidence that it will release its first Windows Phone device in the fourth quarter.
"Strategy transitions are difficult. We recognize the need to deliver great mobile products, and therefore we must accelerate the pace of our transition," Nokia CEO Stephen Elop said in a statement. "Our teams are aligned, and we have increased confidence that we will ship our first Nokia product with Windows Phone in the fourth quarter 2011."
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