Nokia Needs to Tell It Straight

Nokia (NOK Quote) is suffering from a case of erratic guidance syndrome, with ambitious expectations giving way to a warning on more than one occasion.

After sending investors on a roller-coaster ride with its ever-changing outlook in 2008, analysts now expect the world's biggest handset maker to turn decidedly negative in order to temper expectations for an industry that has always been built for growth.

On Friday, Nokia warned that industry mobile-device shipment volumes will be down in 2009 compared with this year, impacted by the continuing overall economic slowdown. If handset volumes were to decline next year, it would be the first contraction since 2001 -- and that was the only time it has happened in the history of cell phones.

Nokia said it will further cut operating expenses next year to respond appropriately to the market conditions. Some analysts lament the fact that Nokia wasn't more specific with its own targets for 2009, instead opting to offer a preliminary view for the entire handset industry.

"All they have given are industry numbers," says Mark McKechnie, research analyst with American Technology Research. "They really didn't get into whether they're talking inventories or market volume or a combination of both. As the market leader, it's really important for Nokia to set the bar right. You don't want to see 1.3 billion phones made and only 1.1 billion consumed."

Additionally, Nokia lowered its estimate for industry mobile volume to 1.24 billion in 2008, down slightly from its previous target, but still up from 1.14 billion units for 2007. Only one month earlier, Nokia's management had endorsed a projection of 10.5% year-over-year global unit growth to 1.26 billion. The change came as Nokia said it now expects that industry mobile-device volumes will be lower in the fourth quarter than previously expected.