Losses Expected in Nokia’s Second Quarter Earnings Report

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Losses Expected in Nokia's Second Quarter Earnings Report

On Thursday, Nokia Corporation (NYSE:NOK) (BIT:NOK1V) will report its second quarter earnings report, and with its recent profit warning and U.S. Lumia 900 price cut, a loss is expected.

The company will release its report before the opening bell. In last year’s second quarter report, Nokia reported a $368 million loss with $9.3 billion in revenues.

What to Look for in the Report

Investors will keep their eyes on Nokia’s  smartphone sales, especially its Lumia line that runs with Microsoft Corporation (NASDAQ:MSFT) Windows Phone software. Earlier this week, Nokia and AT&T Inc. (NYSE:T) cut the U.S. price of the Lumia 900 in half to $50. Red flags went up, questioning the phone’s sales in its brief three-month tenure.

According to the Associated Press, Nokia said the cut is “a normal strategy that is put in place during the life cycle of most phones.”

But for Nokia, they’ve fallen on tough times after being a dominant player in the global cell phone market for over a decade. They’ve lost smartphone marketshare to Apple Inc. (NASDAQ:AAPL), and now lower-end devices are posing a challenge. In June, the research firm, Gartner, said that in the first quarter, Samsung took the top spot from Nokia Corporation (NYSE:NOK) as the world’s top cellphone maker with its 86.6 million units sold, vs. Nokia’s 83 million. This ended Nokia’s 14-year reign.

On a global level, Nokia’s market share has diminished from its 40 percent peak in 2008 to 2011’s 29 percent. Look for additional declines this year.

Nokia’s share price hasn’t fared much better: it’s at the lowest level since the 1990’s, tanking below $2 in the middle of June.

Also last month, Nokia warned that with the greater competition in the smartphone market, it would impact the company’s second and third quarter operating margins.

From Nokia’s declining numbers, it highlights the challenges that Europe is facing in the mobile phone industry. Nokia, once considered the market’s bellwether, has moved its manufacturing to Asia. It also announced 10,000 job cuts in June, with plans to close research and development facilities in Ulm, Germany, and Burnaby, Canada, along with its manufacturing plant in Salo, Finland, reported AP.

One Analyst Says…

So what does one analyst foresee for Thursday?

Analyst Hannu Rauhala, from Pohjola Pankki in Helsinki, doesn’t see good news on Thursday, and said to AP,  that “no beautiful figures can be expected.” He added, “We can expect a loss for sure. Focus will largely be on what kind of guidance the company will give for the third quarter.Visibility on the company’s business is very short. I mainly expect to hear how the company is planning to defend its position in the transition phase from the older Windows Phone operating system, to the new one.”

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