Nokia Dumps Sales Chief and Plans for More Cuts as Sales Dry Up
Nokia (NYSE:NOK) was trading sharply lower Thursday morning after reporting a 929 million-euro ($1.2 billion) loss for the first quarter as net sales of devices tumbled 40 percent. The loss compares with a profit of 344 million euros a year earlier, while revenue fell 30 percent from 10.4 billion euros to 7.4 billion euros.
Smartphone sales declined more than 50 percent to 1.7 billion euros amid tougher-than-expected competition, Nokia said as it gave a dim outlook. Operating margins in the second quarter will be “similar to or below the first quarter 2012 level of negative 3 percent,” said the company, adding that it would speed up a cost cutting goal of 1 billion euros by 2013.
That cost cutting is what gave Nokia shares an early boost after earnings, though shares ultimately posted a 3.4 percent loss. Since Nokia had already issued an earnings warning for the first two quarters, mediocre earnings came as no big surprise, though the company still managed to come up short, reporting a loss of 0.08 euros a share, one center wider than consensus targets.
Nokia has committed to announce the details of the coming cost cuts soon. One such cut is known already: Colin Giles, head of global sales since January 2010, will leave the company as it restructures its sales unit, “reducing a layer of sales management,” according to a statement from Nokia.
The company said it would not provide annual targets for 2012, as it is a “year in transition.” Just last year, Nokia was still the world’s top cellphone maker with annual unit sales of 419 million. But in the last quarter of the year, it posted a net loss of 1.07 billion as sales slumped 21 percent and smartphones sales fell 23 percent. Nokia shares dropped to a 15-year low of 2.98 euros earlier this week after Moody’s downgraded its debt grade to near junk status.
Nokia hopes its new Windows Phone 7, which launched in October, will help remedy the slide. The company will phase out the MeeGo and Symbian platforms to focus on its partnership with Microsoft (NASDAQ:MSFT). Nokia sold more than 2 million Windows-based Lumia phones in the first quarter, giving the company the positive reinforcement it needed to “move our strategy forward even faster,” said CEO Stephen Elop.