Nokia issues profit warning

Nokia, the Finnish mobile phone giant, has warned of losses in the first half of 2012, sending shares plummeting on Wednesday.

The firm, which had originally predicted a flat start to the year, has blamed the fall on stiff competition, particularly in China, Africa, the Middle East and India. Gross margins have declined, especially in the Smart Devices business unit.

"Our disappointing Devices & Services first quarter results and outlook for the second quarter 2012 illustrates that our Devices & Services business continues to be in the midst of transition," said Stephen Elop, President and Chief Executive Officer of Nokia.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

"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."

The firm, which last year announced a strategic partnership with Microsoft, believes the outlook for Devices & Services in the second quarter will be equal to or below the first quarter, which saw an operating margin of around 25%, down by about three percentage points, with the Mobile Phones gross margin around 26% and Smart Devices about 16%.

The news came as the company unveiled its newest version of the Lumia 610 phone, which uses near field communication technology to allow its users to exchange information and date with users of the same or similar technology.

Shares were down 14.54% at €3.27 by 17:06 in Helsinki.

NR