Nokia is in a pickle. They’re one of the few companies that make devices that span the sub 100 EUR part of the market, to over 500 EUR with flagship smartphones, and over 5000 EUR if you include the Vertu lineup. Unlike the other companies that have such a wide product portfolio, Nokia doesn’t have a profitable secondary business. Ovi is failing, and Nokia Siemens Networks is like an alcoholic freshman whose away at college and is constantly asking mom and dad for money. Samsung on the other hand makes a hell of a lot of things, including many of the components that go inside smartphones. The Apple A4 chip … who do you think actually makes it? Samsung. LG too, forget for a minute that they make terrible mobile phones, they have their television business, home appliances, and more.
With that in mind, Nokia issued a statement today saying that their Q2 2010 and full year 2010 financial results are not going to meet the expectations that the company set earlier in the year. They specifically cite “the competitive environment, particularly at the high-end of the market, and shifts in product mix towards somewhat lower gross margin products” as the problems that are giving them heat.
How much lower are the expectations? Read the press release after the jump. It’s short.
And here’s a money quote from Oppenheimer analyst Ittai Kidron: “We believe investors … seriously question Nokia’s ability to survive.”
Update: I’m on the call trying to get more detail, and this was just said by the CFO: “Nseries has been disappointing. Not meeting expectations. Eseries is performing. Ramp up of X6 has been challenging, and that has impacted our expectations.”
Espoo, Finland – Nokia today commented on factors impacting its business and updated its second quarter and full year 2010 outlook for Devices & Services. During the second quarter 2010, multiple factors are negatively impacting Nokia’s business to a greater extent than previously expected. These factors include: the competitive environment, particularly at the high-end of the market, and shifts in product mix towards somewhat lower gross margin products. In addition, the recent depreciation of the Euro affects Nokia’s cost of goods sold, operating expenses and global pricing tactics.
Updated outlook for Devices & Services for the second quarter 2010:
– Nokia now expects Devices & Services net sales to be at the lower end of, or slightly below, its previously expected range of EUR 6.7 billion to EUR 7.2 billion for the second quarter 2010. This update is primarily due to lower than previously expected average selling prices and mobile device volumes.
– Nokia now expects Devices & Services non-IFRS operating margin to be at the lower end of, or slightly below, its previously expected range of 9% to 12% for the second quarter 2010. This update is primarily due to a lower than previously expected gross margin.
Updated outlook for Devices & Services and mobile device market for the full year 2010:
– Nokia continues to expect industry mobile device volumes to be up approximately 10% in 2010, compared to 2009 (based on its revised definition of the industry mobile device market applicable beginning in 2010).
– Nokia continues to target its mobile device volume market share to be flat in 2010, compared to 2009.
– Nokia now expects its mobile device value market share to be slightly lower in 2010, compared to 2009. This update is primarily due to the competitive situation at the high-end of the market and shifts in product mix. This is an update to our previous target to increase our mobile device value market share slightly in 2010, compared to 2009.
– Nokia continues to target non-IFRS operating expenses in Devices & Services of approximately EUR 5.7 billion in 2010.
– Nokia now expects Devices & Services non-IFRS operating margin to be at the lower end of, or below, its previously targeted range of 11% to 13% for the full year 2010. This update is primarily due to the currently estimated gross margin, which is lower than previously estimated. Nokia expects Devices & Services non-IFRS operating margin during the fourth quarter 2010 to be higher than the currently expected full year Devices & Services non-IFRS operating margin.
Nokia will provide its second quarter results and more details on its 2010 full year outlook when it reports its Q2 2010 results on July 22, 2010.