Nokia warned its second-quarter results will miss its earlier guidance, as the world's largest mobile phone maker suffers from price pressure and tough competition in its core markets of Europe and China. Revenues at its main Devices & Services division are expected to be "substantially below" its earlier forecast of EUR 6.1-6.6 billion, due to lower-than-expected average selling prices and weak sales volumes. While the company previously predicted an adjusted operating margin of 6-9 percent for the division in Q2, it now expects the margin could sink to around breakeven. Nokia cited three factors for the profit warning: competitive dynamics and market trends across multiple price categories, particularly in China and Europe; a product mix shift towards devices with lower ASPs and gross margins; and pricing tactics by Nokia as well as certain competitors. Due to the dramatic change in outlook, Nokia also withdrew its guidance for Q3, Q4 and the full year 2011. The company said it's taking "immediate action" to address the issues impacting Devices & Services, and its long-term strategic objectives and targets remain unchanged. Some of its latest efforts include price cuts on its current smartphone range, stepping up retail point-of-sale marketing, the launch of dual-SIM devices last week, steady progress on the planned launch of its first Windows Phone in Q4, and the earlier target to cut operating costs at the handset division by EUR 1 billion by 2013. After this "transition" period, Nokia continues to target Devices & Services net sales to grow faster than the market and an adjusted operating margin of at least 10 percent at the division. Nokai CEO Stephen Elop said the company will need to "accelerate the pace of our transition", adding "we have increased confidence that we will ship our first Nokia product with Windows Phone in the fourth quarter 2011."
