Struggling Nokia stock price needs tactical actions
Only yesterday we were telling readers about Nokia’s public relations coup of the century regarding the company’s excellent response to the Nokia Lumia 900 problems on AT&T. Today we have news that Nokia’s stock price is in dire straits and tactical action needs to be taken.
We told yesterday how the move from Nokia to compensate purchasers of the much-awaited Lumia 900 would cost the company an awful lot of money but that it may be worth it in the long term to win customer loyalty to the brand. However things are worse for Nokia than we initially expected as the company has warned that earnings for the last quarter will be lower than anticipated and that earnings for this quarter will only have got to the levels expected for Q1.
Whereas approximate break-even results had been forecast, Nokia now expects negative margins of between 2 and 3% for its devices and services business. In a statement Nokia CEO Stephen Elop referred to the financial results and outlook and said it pointed to this part of the company being in the “midst of transition,” according to AllThingsD. As far as tactical price actions to be taken Nokia stated that this would involve the low-end of its phone business and sounded ominous when cautioning it “will accelerate planned cost reductions and will pursue additional significant structural actions if and when necessary.”
Elop did have praise though for Nokia employees and the momentum gathered through its range of Lumia handsets and told how the Lumia range will receive further investment. Over 2 million Lumia phones were sold in Q1 and as confidence grows in the Windows Phone operating platform those figures are likely to continue increasing.
In further news from AllThingsD we learn that company shares fell 18% after the profits warning and were down to $4.38 at the time of the report. It’s a harsh reminder to the company that just when things seemed to be taking off once more the reality is that a whole lot more work needs to be done. Indeed Stuart Jeffrey of Nomura Equity Research warned that Q2 may be even weaker than the revised expectations and said, “unless new feature phone models are an instant hit, there is a risk that Q3 will see another leg down in earnings.”
Nokia’s market capitalization has now dropped to $16.25 billion, within $2 billion of its cash position in December, which would make it ripe pickings for a cash-rich investor. What are your thoughts on Nokia’s current financial predicament? Do you think that the increasing popularity of its Lumia range of smartphones is enough to bring it back to more profitable times?