Nokia cuts Q2 forecast on smartphone, margin concerns

Nokia (NYSE:NOK) issued a warning on its second-quarter financial performance, another indication that stiff competition in smartphones is hurting the world's largest handset maker as it tries to stay ahead of competitors such as Research In Motion (NASDAQ:RIMM), Apple (NASDAQ:AAPL) and HTC.

The company said that its second-quarter sales and margins in its key devices and services unit will be weaker than expected. The profit warning comes less than a week after some analysts, including those at the Macquarie Group, said Nokia might do so.  Nokia blamed the lower guidance on competition in the high-end market, shifts to a product mix with smaller margins and the recent depreciation of the euro. The Finnish firm now expects sales to be at the lower end of its range of $8.2 billion to $8.8 billion for the quarter, and margins to be at the lower end or slightly below its previous range of 9 percent to 12 percent.

Nokia, which reports earnings July 22, also updated its outlook for the full year. The company now expects its mobile device market share to be slightly lower in 2010, compared to 2009.  This will be weaker than its previous target, which had the company increasing mobile device market share slightly in 2010, compared to 2009. Nokia also cut its full-year margins forecast, and said margins will be at the lower end or below is previous range of 11 percent to 13 percent.

As competition in smartphones intensifies, especially from Apple and companies like HTC and others that make phones running Google's Android platform, Nokia has struggled to keep its momentum. The company is still the world's largest smartphone maker, due to the strong global presence of the Symbian platform, but Nokia executives have acknowledged it must do better. The company is banking on its MeeGo devices to catapult it back into prominence at the high end of the market, as well as a refreshed version of the Symbian platform. Nokia's first Symbian^3 smartphone, the N8, will begin shipping in the third quarter and Nokia has promised to deliver a MeeGo device before year-end. 

For more:
- see this release
- see this WSJ article (sub. req.)
- see this Bloomberg article

Related Articles:
Analysts: Nokia may issue Q2 profit warning
Nokia promises high-end experience with MeeGo
Nokia shakes up management structure yet again
Nokia releases flagship Symbian^3 smartphone, the N8
Nokia CEO pledges to 'help close the gap' on smartphones

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