Investors losing faith that Nokia can stop the rot

Thu Apr 12, 2012 11:07am EDT
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By Tarmo Virki

HELSINKI (Reuters) - Ailing cellphone maker Nokia has the cash to survive seven quarters like the last, but investors are losing faith that it can break the vicious circle that keeps customers and in turn application developers from its new phones.

Chief Executive Stephen Elop, who joined from Microsoft in 2010, gambled last year that ditching Nokia's homegrown Symbian phone software in favor of a largely untried version from his old employer would put the company back in the driving seat.

On Wednesday it warned that it would make losses in the first two quarters of this year, after demand for the moribund Symbian phones collapsed, while sales of its new Windows Phone models are a long way short of compensating.

The market took fright when Elop made the decision, and tumbled again on the loss warnings. Any investors still holding the stock after a year-long white-knuckle ride have lost two-thirds of their investment. On Thursday, the stock was down about 7 percent after a 15 percent fall a day earlier.

Despite getting the new Windows Phone models out at breakneck speed, it has sold fewer than expected, as consumers remain wedded to Apple's iPhones or Samsung models running Google's Android system, both of which come with a bigger range of applications supported by a much larger population of developers.

"It is too early to write Nokia off," said analyst Peter Cunningham at Canalys. "It is still in the middle of its transition to Windows Phone, but it doesn't have the luxury of time. The next six months will be critical in the company's long-term future. The Lumia 610 needs to be a success, and it needs some hit products in the market in time for Christmas."


In the first quarter Nokia sold just over 2 million Lumia phones, compared with expected sales of 31 million iPhones and the 37 million smartphones Samsung is expected to sell in the quarter, according to a Reuters poll.   Continued...

A rusted chain and a lock are seen at a closed gate of the Nokia mobile phone plant in Bochum May 16, 2008. REUTERS/Wolfgang Rattay