Monday, November 29, 1999

Nokia warns on key phone unit, shares drop 10 pct

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Nokia warned on Wednesday its second-quarter sales and profits at its key phones unit would be weaker than expected as it struggles to compete against high-end rivals like Apple .Shares in the world's top cellphone maker, which also said 2010 profits would be weaker, fell more than 11 percent to 7.02 euros, to their lowest level since March 2009 and at 1447 GMT were down 9.5 percent."Investors are worried about Nokia's long-term market position. Nokia loses market shares at the high-end, the mix worsens and margins go down. At the high-end, Nokia loses mainly against Apple," said Inge Heydorn, asset manager at Sentat Asset Management.Nokia shares have dropped around 20 percent so far this year, strongly underperforming the European technology shares index <.SX8P>, which is up 9 percent."Nokia has, considering the competition, one of its weakest product portfolios ever," said Swedbank analyst Jari Honko.Nokia said profit margins at its key cellphone unit would be at the lower-end of its forecasts, or below, in the second quarter and in 2010, citing tougher competition, particularly at the high-end of the market as well as and shifts in product mix towards somewhat lower gross margin products.The firm had previously predicted the unit's operating margin would be 9-12 percent in the second quarter and 11-13 percent for the full year.Nokia also said it expected its share of the global cellphone markets in terms of value to fall this year, when it previously had targeted a slight increase year-on-year."In addition, the recent depreciation of the euro affects Nokia's cost of goods sold, operating expenses and global pricing tactics," Nokia said.The euro has weakened 9 percent since start of the second quarter.Timo Ihamuotila, Nokia's chief financial officer, said also the third quarter would be challenging for the company, but forecast for a seasonal upswing in the holiday-sales-fuelled fourth quarter.Nokia's market value has dropped by 17 billion euros ($21 billion) -- roughly equal to Jamaica's or Senegal gross domestic product -- since start of the quarter.Ihamuotila said the overall cellphone market continued to be healthy in the second quarter so far, but said Nokia's N-series smartphones have suffered under increasing pressure from rivals.The multimedia-focused N-series series was Nokia's crown jewel before Apple's iPhone stormed the smartphone market after its 2007 launch.Graphic on Nokia N-series losing to iPhone: second profit warning in less than two months is set to further increase pressure on Nokia's Chief Executive Olli-Pekka Kallasvuo, who has been with the company more than half of his life.Kallasvuo has been under increasing criticism from analysts and shareholders as Nokia's share price has missed the market recovery and the company has not been able to build a formidable rival to the iPhone in more than three years.Nokia's last hit smartphone model, the N95, was unveiled in 2006, the year when Kallasvuo, a long time company lawyer, took over at the helms of the firm.Its iPhone-challenger, the N8 model, is due to reach the market next quarter.(Reporting by Terhi Kinnunen and Brett Young in Helsinki, Sinead Carew in New York, Blaise Robinson in Paris, Simon Johnson, Olof Swahnberg and Jens Hansegard in Stockholm; Writing by Tarmo Virki; Editing by Mike Nesbit)($1=.8101 euros)(For more business news on Reuters India click
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