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Nokia (NOK)
Nokia Rings in First Loss Since 1996
In this economy, we have seen numerous companies forced to report losses, something which some of these companies haven't experienced in five, ten, or even twenty years. And it doesn't matter how large or prominent the company is, the economy has affected companies both large and small. Today, the world's largest mobile phone manufacturer, Nokia Corp., has been the latest company to join these ranks, announcing its first quarterly loss since the company began reporting quarterly figures in 1996. What has caused this unfortunate turn of events, and has this affected Nokia's spot at the head of the industry?
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Analysts had been expecting a profit of 367 million euros, and were shocked to see Nokia's 559 million euro loss ($834 million). Just one year ago, the company was able to report a profit of 1.09 billion euros. Total sales missed the mark as well, falling 20% to finish at 9.8 billion euros, slightly below estimates of 10.03 billion euros. The company's adjusted earnings worked out to 17 euro cents per share, which was almost a 50% decrease from the year before.
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There were two major factors contributing to Nokia's decline. First was the increased competition from other mobile phone manufacturers. Today, when most people imagine a smartphone, they are picturing either Apple's (AAPL: Charts, News, Offers) iPhone, or Research in Motion's (RIMM: Charts, News, Offers) BlackBerry line, and not a product from Nokia. Furthermore, as demand declined, phone manufacturers were forced to drop their prices, and Nokia followed suit, causing its average price per phone to drop from 72 to 62 euros. Luckily for Nokia, however, the company was able to remain competitive in its field, and its status as the largest mobile phone manufacturer was not threatened. The company has also posted a positive outlook for future demand, projecting that demand will not continue to fall as much as they had previously anticipated.
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The second issue that Nokia faced was circumstances surrounding the Nokia Siemens Networks venture. The venture, which is co-owned between Nokia and Siemens (SI: Charts, News, Offers), has proved troublesome over the past couple years, but the companies have remained faithful to it. The operating margin for this unit has slipped from 18.6% to 11.4%, sales fell 21%, and Nokia took a goodwill writedown of 908 million euros. Despite all this, one analyst summed up the situation by saying "Investors may have underestimated the weakness in Nokia Siemens Networks, but Nokia's mobile phone business looks quite healthy." So if Nokia can continue to keep up with the competition, and if demand starts to recover, then maybe next quarter the company will be ringing in the good news once again.
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More Buzz about Nokia:
Nokia shows off first netbook - The earnings report wasn't Nokia's only big news this week; on Tuesday, the company announced its new netbook along with some video demonstrations.
Nokia makes first loss for more than a decade in face of fierce competition - Although some analysts have taken an optimistic view of Nokia's earnings report despite the unexpected loss, this author think it's a little more complicated than that...
Nokia N920 possibly already in the works - The public is always clamoring to know what new product is coming out next; and the latest rumors are of a N920 smartphone, even though the N900 model hasn't even been released yet.
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