IT Investors Dismiss Nokia’s Q2 Gains
Posted on July 28th, 2009
Nokia, the world’s largest mobile handsets manufacturer posted an eightfold increase in operating profits from $78 million to $602 million for the second quarter of 2009. Sales also increased 70% to $14 billion dollars.
Nokia Chief Executive officer Olli-Pekka Kallasvuo offered that he was “quite pleased†with the company’s earnings for the last three months as it was better than how they fared during the first quarter of the year.
The growth from last quarter’’s slump, however, failed to please investors as Nokia’s Chief Finance Officer Rick Simonson told analysts and reporters that the company thinks the industry demand is bottoming out and the industry remains in a fragile global economic environment.
Simonson surmised that the investors seem to focus on the second part of his statement. He said, industry players were probably looking to Nokia for signs that the technology sector is picking up but were displeased to hear otherwise.
While Simonson maintained that his forecast was prudent and appropriate, shares in the world’s largest mobile phone manufacturer plunged 15% in New York trading.
Investors disregarded the profit rebound and chose to focus on Nokia’s modest forecast for the rest of the year.
Nokia shared that it does not expect its 38% global market share to grow much, contrary to previous forecasts made by the company. Nokia management also said that there won’t be much improvement on the profit margin, as much as they have hoped for.
The new forecasts roused speculations that Nokia still does not have a clear strategy on how to regain the market share from Apple and Research in Motion (manufacturer of Blackberry), in the profitable smartphone category.
Research Director at Market Watcher Gartner, Carolina Milanesi said investors did not think the new devices Nokia is bringing to the market will be competitive enough. “I think that’s what made the stock (market) react the way it did,†she added.
The touch-screen equipped N97, however, was an exception as it enabled Nokia to regain some of the share it has lost in the smartphone sector. It was able to capture 41% of the segment this quarter, from last quarter’s 39%.
Nokia will continue to focus on pocket-sized devices but is looking at offering products that are closer to mobile PCs than mobile phones, should there be a demand.
Nokia CEO Kallasvuo said mobile handsets already outnumber PCs and would be the main internet medium for most people. “The mobile industry is going through the biggest change in its 20-year history and it is available to be shaped by Nokia,†he added.
