Nokia cancels 2011 financial update as Q2 expectations plummet

Increased competition from China and change in strategy cited as reasons for failings

Nokia has announced that it will not release any financial targets for 2011 after figures for the second quarter fell well below its initial estimates.

The troubled handset manufacturer said that sales will come in far below expectations of €6.1bn to €6.6bn, after increasing competition in the Chinese and European markets and lower profits on devices.

Expected operating margins of six to nine per cent are set to fall to as low as zero, underlining the crisis facing Nokia as its market share declines.

Chief executive Stephen Elop said that Nokia is hindered by its change in approach, but that he is confident that the firm's new direction will see a change of fortune in the coming months as new Windows Phone devices hit the market.

"Strategy transitions are difficult. We recognise the need to deliver great mobile products, and therefore we must accelerate the pace of our transition," he said.

"Our teams are aligned, and we have increased confidence that we will ship our first Nokia product with Windows Phone in the fourth quarter of 2011."

Nokia's share price plunged 16 per cent on the news, falling to as low as £4.83 from a high of over £60 in 2000 at the height of Nokia's dominance.

Nokia cancels 2011 financial update as Q2 expectations plummet

Increased competition from China and change in strategy cited as reasons for failings

Clive Longbottom, an analyst at Quocirca, told V3.co.uk that the decision to cancel the outlook is odd as it gives investors and mobile operators more reasons to steer clear of the company.

"I'm surprised at Nokia for cancelling the outlook, as this will just make things worse. A restatement would have been better. On the other hand, it isn't a surprise as it has managed to foul things up pretty well over the past few months," he said.

"The 'burning platform' leak - whether accidental or intentional - hit views on the longer term viability of the company, and not just with investors. Telecoms companies would be wary of taking them after such a damning comment."

Gartner research vice president Carolina Milanesi said the announcement confirms that "things will get worse before they get better" for Nokia, and that the company is unsure what the future holds.

"The decision not to comment on the forecast shows the uncertainty around how much it can sustain such low average selling prices to maintain volume, as well as maybe not wanting to give out much about what it is expecting on its first Windows Phone 7 devices," she added.

Nokia's financial woes come after the firm confirmed that it will slash 4,000 jobs in several nations, including the UK, and transfer Symbian software development to Accenture as the firm struggles to recapture its former glory.