Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

If You Think It Can't Get Any Worse for Nokia, Remember That Apple's iPhone 5 Is Coming

By

Nokia cut guidance and announced massive layoffs, but its troubles show no sign of stopping.

PrintPRINT
MINYANVILLE ORIGINAL Those that thought things couldn't get any worse for Nokia (NOK) are having a horrible morning, as analysts revised their guidance of the former number-one player in the mobile-phone market down, and the company announced a huge restructuring.

Here are the headline details:
  • Q2's non-IFRS Devices & Services operating margin is now expected to be below Q1's -3% level versus prior expectations of "similar to or below" that Q1 level.
  • The source of the trouble is "competitive industry dynamics."
  • Nokia will cut 10,000 jobs by the end of 2013.
  • The company will eliminate certain research, development, and manufacturing operations.
  • A number of key executives from the Nokia Leadership Team will step down, including the chief marketing officer and executive vice president of Mobile Phones.
Now most of this is noise, because as we've known for quite a long time, Nokia's main problem is that it can't stand the product heat from Apple (AAPL) and Samsung. (See: Samsung and Apple Are Set to Continue Their Domination of the Global Smartphone Market.)

In fact, if we look at a 10-year chart on Nokia we can see that during the last bull market, it peaked at $42.22 on November 7, 2007 -- 131 days after the original iPhone's release on June 29, 2007.



So as of this morning, Nokia is down a whopping 94% from that peak.

Measured from June 29, 2007 close of $28.11, it is down 91%.

Ouch!

Of course, Nokia's not the only phone-maker with problems, as evidenced by the slowdowns at Motorola Mobility, which was recently acquired by Google (GOOG), Research In Motion (RIMM), and HTC. (See: HTC Gets Hulk-Smashed by Apple-Samsung Dominance, European Woes, Microsoft's Shunning, and Yet Another Patent Fight.)

Check out this chart for more details:



And take note of the Chinese players ZTE and Huawei -- they are grabbing share and creating new competitive pressures.

Of course, it's not helping that the mobile-phone market and its smartphone sub-segment are slowing:





So not only does Nokia have a serious problem in getting a killer smartphone out there in the face of nasty competition, the industry backdrop is clearly deteriorating because of sky-high phone penetration in developed markets and the eurozone economic mess.

Things will only get tougher for Nokia when Apple releases iPhone 5.

Even with the death of the world's greatest salesman, Steve Jobs, Apple-mania shows no signs of slowing. Consumers went gaga over last year's iPhone 4S and this year's new iPad, and they're drooling over the new MacBook Pros with the ultra-high resolution Retina displays.

The 4S was a fairly minor update to 2010's iPhone 4. I suspect this year's iPhone 5 will be a more significant upgrade. Specifically, given Apple's obsession with breaking new ground in displays, my guess is the iPhone 5 screen will be absolutely magical and act as a major attention-grabber.

Every iPhone in history has destroyed sales expectations. Think this year will be any different?

According to Gartner, Nokia had 37.8% mobile-phone market share at the end of 2007.

It was down to 19.8% in the first quarter of this year.

Does anyone really think that trend can reverse while Applemania's still hitting all-time highs?

Twitter: @MichaelComeau

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
Position in AAPL
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE