Smartphone strategy, Japan in focus in Nokia Q1

By @ibtimes on

Nokia investors concerned about dwindling market share are anxious for better news on the tie-up with Microsoft and details of cost cuts when the handset maker posts quarterly figures on Thursday.

Nokia is expected to report a 29 percent fall in earnings per share as nimbler Asian rivals eat into its dominant position in cheaper phones and it continues to lose out in more expensive smartphones to Apple and others.

To turn around its smartphone fortunes, Nokia's new Chief Executive Stephen Elop in February unveiled a deal to start using Microsoft software instead of its own Symbian platform.

Investors are awaiting details on the cost savings stemming from the switch.

Broader knowledge of what the agreement contains would reduce the uncertainty relating to the share and would thus support the share price, said Pohjola analyst Hannu Rauhala.

Nokia shares have dropped some 30 percent following the Microsoft deal as investors doubt the wisdom of the new hardware-centric strategy.

Nokia said the deal would enable it to cut a significant number of jobs. The final deal between the two is expected to be signed this month.

Finnish unions have said the firm will cut thousands of jobs in its home country alone, with analysts pointing to possible annual savings of 1 billion euros ($1.4 billion).

The underlying operating profit margin at Nokia's phone unit, a key metric for the group, is expected to fall to 8.6 percent from 11.3 percent in the previous quarter, hurt by market share losses and price cuts of its key models.

Analysts say that, despite its bigger bargaining power, Nokia is likely to be among the phone makers worst hit by the disruption to supplies from last month's devastating Japanese earthquake.

It makes 450 million phones a year, which means quick and big changes in component supply are difficult.

Nokia warned in March it would have shortages of some of its phones, but said the impact on earnings would be limited.

Nokia's smaller rival Sony Ericsson said this week there were shortages of displays, batteries, camera modules and some printed circuit boards due to the quake.

(Editing by David Cowell)

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