Nokia warns of poor start to 2012 and lowers outlook

CEO Stephen Elop says Nokia has sold two million Lumia devices but warns of more restructuring if results do not improve

Nokia has lowered its financial outlook for the first half of this year, blaming industry competition and lower than expected phone sales.

Nokia CEO Stephen Elop said the results would be 'disappointing' and stressed the business was in the middle of a transition period. Nokia warned of further restructuring if the results do not improve. It announced 4,000 job cuts in February.

The Finnish handset manufacturer is due to reveal its first quarter results on 19 April but this lunchtime said it expects its operating margin for the devices and services wing to be -3%, compared to previous forecasts that it would break even. It blamed 'competitive industry dynamics', with sales hit particularly in the Middle East, Africa, China and India, as well as gross margin declines in its smartphones unit.

It had a gloomier prediction for its second quarter, predicting operating margin would be similar to Q1 if not lower. It said the benefit of lower warranty costs during the first quarter of 2012 would be lost and added the business would be affected by strong competition, timing and consumer demand for new products and the macroeconomic envrionment.

Nokia said it sold more than two million Lumia devices at an average selling price of €220 during the quarter. It said the Windows Phone ecosystem has 'expanded rapidly' and now has more than 80,000 apps available. It said it would invest more cash in its smartphone unit to bring more products to more markets. This morning it announced it was launching an NFC-enabled Lumia 610 with Orange.

Nokia CEO Elop said: 'Our disappointing devices and services first quarter 2012 financial results and outlook for the second quarter 2012 illustrates that our devices and services business continues to be in the midst of transition. Within our smart devices business unit, we have established early momentum with Lumia, and we are increasing our investments in Lumia to achieve market success. Our operator and distributor partners are providing solid support for Windows Phone as a third ecosystem, as evidenced most recently by the launch of the Lumia 900 by AT&T in the United States.'

For the quarter, Nokia predicts first quarter net sales of €4.2bn in its devices and services business, which includes mobile phone sales worth €2.3bn across 71 million units and smartphone sales of €1.7bn across 12 million units.

Gross margin for the devices and services business will be 25%, with mobile phone margin around 26% and smartphone gross margin approximately 16%.