Nokia shares drop to 13-year low

Perhaps it's a case of riding through the storm right now for Nokia. Microsoft is on the horizon, but at the moment, the company is trying to sell its current crop of mobile phones to a largely unreceptive audience. The end result doesn't make good financial reading.

Shares in Nokia dropped by 15% on Tuesday as the company warned that it may make no profit on phone sales in the quarter to the end of June. It also confirmed that overall phone sales will be 'substantially below' its earlier forecast of €6.1bn to €6.6bn. That drop in share price has taken it down to 1998 levels, which shows just how deep Nokia's problems actually are right now.

According to The Guardian, Nokia is still the biggest maker by volume of both handsets and smartphones, selling about 100m and 24m respectively per quarter. The problem is revenue, with Nokia taking a hit at the top-end of the market (where the big money is) from the iPhone and handsets using Google's Android operating system. It was overtaken for total revenue in the first quarter by Apple, which sold 18.7m iPhones – at nearly five times the average price of a Nokia smartphone, and 10 times the average price of a Nokia handset. You don't need to be a maths genius to work out where the money is (or isn't) going.

Expert opinion isn't exactly talking up the company either. According to Carolina Milanesi, mobile phones analyst for the research company Gartner, 'it's going to get worse before it gets better'.


She said: 'The second quarter should be the worst – if it isn't then they have worse problems than we thought they did. In the third and fourth quarter this year there will be new products. If they can't get traction with those then it will be a big issue.'

In addition, while the move to Microsoft might be good one in the long term, some claim the shift is causing the company problems in the short term. Lee Simpson of Jefferies & Co said: 'You clearly have a Symbian platform that [mobile] operators are avoiding shouldn't be too surprising that we get another profit warning from Nokia for the Q2 and Q3 periods.'

So a rocky ride ahead for Nokia, at least for the coming months anyway. Let's hope the short-term pain is balanced out by some long-term gain with that Microsoft deal.

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