Nokia downgrades outlook as developers flee

Nokia Corp. continues to buckle under the increasing might and will of its competitors in the smartphone space.
In a note to investors , the company downgraded the financial outlook for its devices and services division for the second (current) quarter and full year of 2010. The company said “multiple factors are negatively impacting Nokia’s business to a greater extent than previously expected.” While that may be true, it would be difficult to conclude that most of these “factors” have come as a surprise to the world’s largest manufacturer of cellphones.
Apple Inc.’s iOS and Google Inc.’s Android operating system are all the rage these days and the writing has been on the wall for Nokia to read loud and clear for some time. Meanwhile, BlackBerry-maker Research in Motion Ltd. appears to be getting the message as it continues to push new device lineups into market. Most recently, the Canadian firm is rumored to be launching a tablet later this year and new smartphone in a fresh form factor with a touchscreen and slide-out QWERTY keyboard is expected sometime this summer.
In it’s downgrade, Nokia didn’t shy from the fact that the “competitive environment” is taking its toll — indeed, the company listed that top among its factors, but points out that the most damaging competition is “particularly at the high-end of the market.” As such, Nokia has been shifting its “product mix towards somewhat lower gross margin products,” the company wrote. Lastly, the recent depreciation of the euro is affecting Nokia’s bottom line as well.
Nokia pinned its devices and services net sales to be “at the lower end of, or slightly below” the previously expected range of 6.7 billion to 7.2 billion euros for the current quarter. The company said the change is “primarily due to lower than previously expected average selling prices and mobile device volumes.”
For the full year 2010, Nokia now expects its mobile device value market share to be “slightly lower” compared to last year, “primarily due to the competitive situation at the high-end of the market and shifts in product mix.” Nokia previously targeted an increase in is mobile device market share year-over-year.
A recent report from Bloomberg isn’t helping matters. Nokia app developers tell Bloomberg that the future of Nokia’s smartphone segment is unclear and that its Ovi Store is “clunky.”
Bloomberg aptly reported that “the world’s largest mobile-phone maker’s failure to lure apps developers, whose products help sell iPhones and Android devices, adds to the perception that its devices are behind the devices.”
It’s a classic case of what comes first — developers are inclined to put time and resources into platforms that are most popular with consumers, which in turn makes their apps more appealing, while customers are inclined to embrace platforms that have the most exciting and well-executed apps.
Finally, Bloomberg points out that “Nokia shares have plummeted 51 percent since Apple opened its App Store on July 11, 2008.” With those kind of figures, it’s hard to believe Nokia doesn’t know what it’s problem is and where it stands the best chance to recoup some of its lost market share.