Nokia warns of weak start to 2011 as profit slips

By @ibtimes on

Nokia, the world's top cellphone maker by volume, warned of a weak start to 2011 after its market share shrank again in the fourth quarter, sending its shares sharply lower.

Stephen Elop, who took over as chief executive last September, said the company faced significant challenges in its competitiveness and execution.

These results point to the daunting task ahead of Elop in 2011, Geoff Blaber from CCS Insight said. Disappointing total volume, including smartphones, emphasizes that these are dark days for Nokia.

Elop will unveil his plan to revamp Nokia's strategy on February 11.

Nokia's shares were down 8.7 percent in early trading at 7.12 euros but later recovered to stand off 3.85 percent at 7.50 euros.

The phone market has recovered from a slump in 2009 when the global economic slowdown dampened demand for the latest gadgets, with demand for new smartphones like Apple's iPhone 4 and Samsung's Galaxy S surging.

However, Nokia has lacked a hit smartphone since the N95, which it launched in 2006 before Apple stormed onto the market.

Nokia's share of the smartphone market fell to 31 percent in the fourth quarter from 38 percent in the previous quarter.

What scares the market is the rapid share loss that Nokia seems to have experienced in the fourth quarter, analyst Nicolas von Stackelberg from Macquarie Research said.

Even more dramatic than the share loss in smartphones is the slide in market share in standard phones. They seem to be affected by a massive attack in the lower price tiers, in the non-smartphone business, he added.

Chinese manufacturers are eating into Nokia's once dominant position in low-price emerging markets.

Nokia's sales of non-smartphones -- its traditional stronghold -- fell 10 percent from a year ago, dropping for a second quarter in a row, at a time when the overall market grew.

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Nokia warned first quarter operating profit margin at its phone unit would drop to 7-10 percent in the January to March period from 11.3 percent last quarter, missing analyst forecasts of 10.2 percent.

It also said its telecom gear venture Nokia Siemens Networks would at best reach break even in that quarter, missing analysts' average forecast for a small profit.

Nokia's underlying earnings per share fell to 0.22 euros, roughly in line with an average analyst forecast of 0.19 euros in a Reuters poll, when excluding a 2.5 euro cent boost from lower-than-usual taxes.

(Editing by David Cowell)

(Additional reporting by Terhi Kinnunen, Jussi Rosendahl and Chris Borowski in Helsinki; Simon Johnson and Niklas Pollard in Stockholm)

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