Finnish phone maker, Nokia, has announced that it may not generate profits based on phone sales in the quarter to the end of June, according to The Guardian.
Following the announcement that its phone sales will be “substantially below” the forecast it made earlier, shares in Nokia fell by 15 per cent. This brought them down to May 1998 levels
Despite still being the biggest maker by volume of both handsets and smart phones and shifting about 100 million and 24 million units, respectively, per quarter, the company reported that its operating margins will be substantially below its previously expected range due to lower than previously expected net sales for the period from April to June.
The negative outlook has forced the company to scrap its full-year forecasts under the reasoning that it is now not “appropriate to provide annual targets for 2011".
“The second quarter should be the worst – if it isn't then they have worse problems than we thought they did,” Gartner mobile phones analyst, Carolina Milanes, said.
“In the third and fourth quarter this year there will be new products. If they can't get traction with those then it will be a big issue.”
Despite taking steps to implement Microsoft's Windows Phone OS on its high-end smart phones from “the fourth quarter of 2011” in a bid to remain competitive in the face of Apple’s iPhone and Google Android-based smart phones, Nokia is still finding it hard to recapture its former glory.
Even though the average price of a Nokia smart phone is five times lower than an iPhone, Nokia was overtaken for total revenue by Apple with sales of 18.7 million units in the first quarter.
In addition to fierce competition in the high end, Nokia is facing tough conditions in low end market from “white box” manufacturers from China that are undercutting them on the prices for standard mobile handsets.
While Nokia has said it won't be generating a profit, the company also pointed out that the operating margins for handsets this quarter will be around the breakeven point.