Nokia issued a profit warning, saying increased competition and the weaker euro will lead to lower-than-expected second-quarter results. The world's largest handset maker said multiple factors are negatively impacting its business to a greater extent than previously expected. These include the competitive environment, particularly at the high-end of the market, and shifts in the product mix towards somewhat lower gross margin products. In addition, the recent depreciation of the euro affects Nokia's cost of goods sold, operating expenses and global pricing tactics. The company now expects quarterly sales at its Devices & Services division to come in at the low end or slightly below its previous forecast range of EUR 6.7-7.2 billion, due to lower average selling prices and mobile device volumes. The division's adjusted operating margin is also expected at the low end or slightly below the earlier outlook of 9-12 percent for the quarter. As a result of the weaker sales, Nokia no longer expects to improve its revenue market share this year and instead expects a slightly lower market share versus 2009. The group still expects to maintain its volume device market share for 2010, based on the same forecast for the total market to grow around 10 percent in volume. Nokia kept its forecast for adjusted operating expenses at Devices & Services this year of EUR 5.7 billion, and as a result of the lower sales, the annual adjusted margin will be at the low end or below its previously targeted range of 11-13 percent for the full year. The margin in the key fourth quarter is expected to exceed the annual result.
