Nokia hit by tough smartphone market: Shares nosedive

Shares in the Finnish mobile giant Nokia plunged by 14% after the firm admitted it was facing a tough battle for smartphone sales, “particularly in India, the Middle East, Africa and China”, and revised its Q1 predictions downwards.

The company has faced an uphill struggle since abandoning the ‘burning platform’ of Symbian and throwing its lot in with Microsoft’s WP7 platform. Sales of its new Lumina windows phones have been sluggish, though Nokia says it sold over 2m handsets during Q1; double that of the previous quarter.

The form has been squeezed by stiff competition at the lucrative high-end of the smartphone market from the iPhone and a number of top end Android devices from manufacturers like Samsung; but Nokia is also coming under pressure at the other end of the market from low-end manufacturers like ZTE and LG.

Now a firm which once controlled upwards of 40% of the mobile market, today holds less than 10%.

Operating margins over the first quarter were “approximately negative 3%”, said the company in a statement, compared to expectations of “around break-even, ranging either above or below by approximately 2%”. Second quarter results are expected to be similar, or even lower.

The company said it would increase investments in Lumia to bring more products to more consumers in more markets, take tactical pricing action in its mobile phone business unit and pursue “additional significant structural actions if and when necessary”.

Nokia President and CEO Stephen Elop admitted the results were ‘disappointing’.

“We have established early momentum with Lumia, and we are increasing our investments in Lumia to achieve market success,” he added. “Our operator and distributor partners are providing solid support for Windows Phone as a third ecosystem, as evidenced most recently by the launch of the Lumia 900 by AT&T in the United States."

However, yesterday’s warning came as a double blow, following news this week that Nokia’s renewed smartphone push into the US market with the Lumia 900 handset had faltered after the handsets suffered from a software bug that caused them to drop off the AT&T network.

Although the company has offered compensation to affected users, and plans to have a software update available next week, it’s a disappointing setback.

Nokia will report its full Q1 earnings on April 19. While the Lumia series has gone down well with critics, device sales have not yet managed to offset the drop-off of the firm's previously dominant Sybian OS. Overall, the firm's shareprice has fallen by over 50% since it announced it would partner with Microsoft. What is the way back for Nokia?

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