Nokia CEO Olli-Pekka Kallasvuo allowed that he was “quite pleased” with the Finnish company’s second-quarter earnings, which showed improvement over the dismal first quarter. But stock markets disagreed — big time.
Shares in the world’s largest maker of mobile handsets plunged 15 percent in New York trading as investors brushed off a rebound in profit and instead focused on Nokia management’s more pessimistic forecast for the rest of 2009. The company said it expects its global market share of 38 percent to be little changed from 2008, instead of increasing as the company had predicted earlier. Nokia also said its profit margin won’t improve as much as hoped during the rest of the year.
The revised forecast fueled fears that Nokia still hasn’t figured out how to regain the initiative from Apple and BlackBerry maker Research in Motion in the lucrative smartphone market. Investors “don’t think some of the devices Nokia is bringing to market will be competitive enough,” says Carolina Milanesi, research director at market watcher Gartner. “I think that’s what made the stock react the way it did.”
The N97’s Impact
There was actually quite a bit of encouraging news in the July 16 earnings report. Compared with the first quarter of this year, operating profit rose eightfold, to $602 million, from $78 million, better than expected, while sales rose 7 percent, to $14 billion. (The numbers still look terrible compared with the second quarter of 2008 before the world went into recession. Sales fell 25 percent, and operating profit plunged 71 percent from the year-earlier period.) Thanks to new models such as the touch-screen equipped N97, Nokia also regained some of the share it had lost in the smartphone market, claiming 41 percent of the segment vs. 39 percent in the previous quarter.
“We think industry demand is bottoming out,” Nokia CFO…