"During the first quarter 2012, multiple factors negatively affected Nokia's Devices & Services business to a greater extent than previously expected," explained Nokia, in a press release, citing competitive industry dynamics and gross margin declines.
Nokia, the handset maker, also noted that the second-quarter results at the devices and services unit should be similar or below the first-quarter results.
"Our disappointing Devices & Services first quarter 2012 financial results and outlook for the second quarter 2012 illustrates that our Devices & Services business continues to be in the midst of transition," said CEO Stephen Elop, in a statement. "Within our Smart Devices business unit, we have established early momentum with Lumia, and we are increasing our investments in Lumia to achieve market success. Our operator and distributor partners are providing solid support for Windows Phone as a third ecosystem, as evidenced most recently by the launch of the Lumia 900 by AT&T in the United States."Shares of Nokia hit a 52-week low of $4.01 on Thursday. The stock's 52-week high of $9.42 was set on April 28. "Nokia's profit warning, once again, highlights the precarious nature of trading product cycles in this name," Jefferies analysts wrote in a report Thursday. "Again, however, much still relies on Lumia traction in FY13.... and that the mobile phone space does not continue to limp badly (units down 27% q/q in 1Q12) - we see Samsung ("Youth" handsets), Huawei and ZTE as net beneficiaries of on-going pain for Nokia in this category. In smart devices, we remain sceptical of Nokia's ability to compete aggressively enough in mass market smartphones (sub-$150 next year) in China." Nokia has an estimated price-to-earnings ratio for next year of 12.34 times; the average for telecommunication equipment companies is 10.01. Eighteen of the 30 analysts who cover Nokia rated it hold. Six analysts gave the stock a buy rating and another six rated it hold. TheStreet Ratings gives Nokia a C- grade and hold rating. The stock has fallen 16.08% year to date. -- Written by Alexandra Zendrian
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