Nokia seen making Q2 loss on dwindling mkt share

CIOL Bureau
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HELSINKI, FINLAND: Nokia, the largest phone maker by volume, probably fell into the red in the second quarter and is not expected to recover for a few more as its aging models keep losing market share.


Chief executive Stephen Elop has been pinning turnaround hopes on new smartphones using Microsoft's Windows software, but these will only come to the market later this year.

Nokia's share price has halved since February when it unveiled the shift to Windows on worries the company will lose so much market share before the new phones come out that it might never regain its footing.

At the end of May, Nokia said second-quarter results would be well below its previous outlook and ditched full-year targets.


To hold on to customers, Nokia slashed the prices of its old smartphone line-up from the start of the third quarter, and that will weigh on its margins.

Analysts said the company's third-quarter outlook may fall short of market forecasts, which on average call for an underlying net loss of 51 million euros for the group. They expect the phone business's underlying operating result to break even.

"We remain skeptical about the value proposition of new hardware and think the stock could face even tougher times," said WestLB analyst Thomas Langer in a note to clients, though he upgraded the stock to "neutral" from "reduce" on the potential for a strong line-up of Windows phones.


Apple payment lift in Q2

Smartphone troubles are expected to drag Nokia to an underlying net loss of 10 million euros from a 419 million profit a year ago, according to the average forecast in the Reuters poll of 27 analysts.

Analysts say the increasing popularity of Google's Android software platform has helped Samsung Electronics end Nokia's 15-year reign as the largest smartphone maker globally.


Nokia's share of the British smartphone market, seen as a key indicator for trends in Europe, dropped to 11 percent in the 12 weeks to mid-June, from 33 percent in the same period a year earlier, according to Kantar Worldpanel ComTech's survey.

Nokia has seen similarly sharp falls in Germany, Italy, Spain and Australia. In France, however, its C7 model has been successful and almost halted the fall in Nokia's market share, the research firm said earlier this week.

Analysts' estimates vary widely in part due to a one-off royalty payment from Apple. Some expect a payment of up to $650 million from a legal battle Nokia and Apple settled in June.


Nokia has said also Microsoft would pay it billions under the smartphone deal, but it is unclear whether any portion of that would be included in the second quarter.

In terms of volume in the overall cellphone market, Nokia still leads the pack with 95.5 million phones, boosted by its strong lead in emerging markets, followed by Samsung's 73.7 million.

However, analysts expect Samsung will narrow the gap in the coming quarters, and one of them sees it taking the top spot in 2012.

The cellphone market is expected to show little impact from economic woes and grow a healthy 10.7 percent in the quarter by volume, helped by strong demand for smartphones and good demand for the cheapest models on emerging markets.

No. 9 phone vendor Sony Ericsson last week reported a steep loss for the June quarter due to the earthquake and tsunami in Japan, but said the smartphone market was still growing strongly, while demand for more simple mid-range models was collapsing