Fashion Faux Pas Clips Nokia

Nokia (NOK) got caught napping.

Like a sporting goods store peddling hockey sticks in the thick of T-ball season, the Finnish wireless giant paid the price Tuesday for a winter of pushing the wrong buttons with consumers.

As it turns out, what cell-phone users were demanding was the folding photo phone being churned out in quantity by outfits like Samsung and Motorola (MOT). But Nokia didn't have any of these so-called midprice color-screen models, as first-quarter numbers will amply demonstrate. The strategic shortfall cost the world's largest handset maker more than 2 percentage points of market share, along with a 2% sales decline.

The sharp miss shocked investors, who had been all set for a 5% sales rise on the heels of Nokia's bullish January comments. Tuesday's reversal sent the shares down $3.47, or 16%, to $17.68.

Betting Wrong

Nokia's glowing remarks earlier this year had helped ignite a wireless sector rally. On Tuesday, rivals like Nortel (NT) and Ericsson (ERICY) slipped fractionally. But even as Nokia remains the most widely watched wireless industry barometer, Tuesday's setback struck most observers as being almost purely company-specific.

Indeed, observers had warned that there was a growing gap between what cell-phone buyers were shopping for and what Nokia was offering. Now it seems criticisms that Nokia was too slow to bend to the taste for clamshell-type folding phones may have been accurate.

On a conference call with analysts Tuesday, Nokia executives conceded a lack of clamshell phones was a contributing factor to the sales weakness. But the execs promised some sprucing-up was in store. The company expects to introduce 40 new phones this year, matching last year's efforts.

"There is plenty to come," said Nokia executives on a conference call Tuesday morning. "We've only seen the beginning of the array of products to come to market this year."