Loss expected for Nokia in 2nd quarter

Associated Press

HELSINKI (AP) — Nokia Corp.'s second-quarter report Thursday is expected to be short on good news following a profit warning on June 14 and a sharp U.S. price cut this week for the Lumia 900, the Windows device that was supposed to boost the company's position in America.

WHAT TO WATCH FOR: Investors will be looking carefully at Nokia's sales of smartphones, especially its high-end Lumia line of devices running on Microsoft's Windows Phone software. Nokia and AT&T this week halved the price of the flagship Lumia 900 to $50 in the U.S., raising questions about how the phone is selling just three months after its introduction. Nokia called the cut "a normal strategy that is put in place during the life cycle of most phones."

After dominating the global cell phone market for more than a decade, Nokia has lost out to Apple and Samsung in smartphones and is now also losing ground to Samsung and other makers when it comes to lower-end devices. Research firm Gartner said in June that Samsung overtook Nokia as the world's top cell phone maker in the first quarter, with 86.6 million units sold, compared to 83 million for Nokia. The Finnish company had been No. 1 for 14 years.

Nokia's global market share has steadily shrunk from the peak of 40 percent in 2008 to 29 percent in 2011 and is expected to dwindle further this year. Meanwhile, Nokia shares have fallen to their lowest level since the 1990's, plunging below €2 in mid-June.

Nokia warned last month that increased competition in the smartphone market would affect its operating margins in the second and third quarters.

It remains unclear whether the team-up with Microsoft last year will help reverse Nokia's slide and raise the company's profile in the U.S., where it has struggled to win market share.

THE BIG PICTURE: Nokia's decline underscores how Europe has lost its edge in the mobile industry. The ailing Finnish company — once the market bellwether — is now moving its manufacturing to Asia. Last month Nokia announced plans to slash 10,000 jobs and close down research and development facilities in Ulm, Germany, and Burnaby, Canada, as well as its main manufacturing plant in Salo, Finland.

WHAT'S EXPECTED: Analyst Hannu Rauhala from Pohjola Pankki in Helsinki said that "no beautiful figures can be expected" on Thursday. "We can expect a loss for sure. Focus will largely be on what kind of guidance the company will give for the third quarter," he said. "Visibility on the company's business is very short. I mainly expect to hear how the company is planning to defend its position in the transition phase from the older Windows Phone operating system to the new one."

LAST YEAR'S QUARTER: In the second quarter of 2011, Nokia reported a €368 million loss on revenue of €9.3 billion.

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