Nokia Oyj may tomorrow report itssmallest fourth-quarter profit in a decade, underscoring ChiefExecutive Officer Stephen Elop’s challenge to win back consumersfrom Apple Inc. and Google Inc.’s Android.
The first full quarter on Elop’s watch will include thefirst sizable sales from the company’s N8 smartphone. The 44percent drop in profit forecast by analysts stands in contrastto Apple’s 78 percent earnings growth in the period.
Elop, who took over as Nokia CEO on Sept. 21, may waituntil the company’s investor meeting in London next month to layout his plan to stem the drop in the Finnish company’s reportedmarket share -- down 10 points to 30 percent in the three yearssince the iPhone was unveiled. His tasks include simplifyingNokia’s software platforms, luring more third-party applicationsand contending with lower prices from intensified competition.
“It’ll probably be an in-line quarter and a subduedoutlook and it’ll be all about their strategy day and whetherthe new CEO can really convince people that Nokia can turnitself into an Apple,” said James Crawshaw, an equity analystat Standard & Poor’s in London.
Nokia shares have fallen 0.8 percent since Elop wasappointed on Sept. 10 as the company announced delays toproducts in the pipeline. Apple advanced 29 percent and Googlegained 30 percent in the period. Nokia, the world’s largestmaker of mobile phones, has a market value of 28.7 billion euros($39.3 billion). Apple is valued at $314.5 billion.
Nokia shares rose 7 cents, or 0.9 percent, to 7.75 euros at10:25 a.m. in Helsinki today.
Net income in the fourth quarter may have slid to 529million euros from 948 million a year earlier, according to theaverage estimate of 23 analysts surveyed by Bloomberg. The lasttime Nokia had a lower profit was in the final quarter of 2001,when it earned 450 million euros.
“The quarter should have benefited from the N8 and othernew smartphones, but there are new challenges,” said Mats Nystroem, an analyst with SEB Enskilda in Stockholm. “It takesa lot more in terms of product portfolio and pipeline toconvince investors that they are on the right track.”
Nokia’s results will depend on how the N8 family stacked upagainst HTC Corp.’s Desire and other handsets using the Androidplatform, as well as Apple’s iPhone 4 and devices from ResearchIn Motion Ltd.’s BlackBerry.
The Espoo, Finland-based company has acknowledged qualityproblems with some units of the N8, which began being shipped atthe end of the third quarter, and dropped U.K. online prices forthe N8 and C7 handsets by 15 and 21 percent respectively. It’srolling out improvements to the revamped Symbian 3 software onthe handsets.
“We’re looking for a pretty decent report mainly driven bygood sell-in from a number of different products, and I thinkthe market is anticipating that,” said Michiel Plakman, whohelps manage 7 billion euros including Nokia shares at RobecoGroup in Rotterdam.
Sales may have risen 3 percent to 12.4 billion euros, theaverage of estimates from 38 analysts. Nokia’s results includeits equipment joint venture, Nokia Siemens Networks, and itsNavteq maps division, as well as handsets and related services.
“I think the N8 did extremely well in markets like Braziland India, and Vodafone, T-Mobile and Orange put marketingsupport behind Nokia for the Christmas promotions because theyhad some fresh value devices out,” said Tero Kuittinen, ananalyst with Greenwich, Connecticut-based MKM Partners. “Thefear is that this bounce won’t last very long.”
Elop, a former Microsoft executive, is set to reveal hislong-term strategy for the company at an investor meeting Feb.11 in London followed by an appearance at the Mobile WorldCongress trade show in Barcelona.
Analysts and investors said Elop’s pitch in London could bea bigger trigger for the share price than earnings. He haspostponed a line of products based on the new MeeGo softwareplatform announced at last year’s Barcelona show.
“They’ll have to prove it makes sense to continue on theSymbian platform, and they have to show there is a Plan B forgoing with a different operating system,” said Robeco’sPlakman. “Nokia has to show progress on MeeGo or shelve theproject.”
Since joining Nokia, Elop has streamlined Symbian softwaredevelopment, postponed the keyboard-equipped E7 as well as MeeGophones and gutted a bundled music package.
He has so far left Nokia’s management team in place, exceptfor the appointment of a new marketing chief, Jerri DeVard.
Standard & Poor’s, Danske Bank and Svenska Handelsbankencut their recommendations for Nokia this month. Standard &Poor’s and Danske now recommend investors hold the shares andHandelsbanken advises selling them. Currently 25 analystsrecommend buying Nokia stock, 15 suggest holding it, while 13have a “sell” rating, according to Bloomberg data.
“The market still discounts any major improvement,” saidSami Sarkamies, an analyst with Nordea Bank in Helsinki.“Expectations and share price have come to a low level,resulting in good upside potential in our view.”
Analysts expect the new handsets to increase Nokia’saverage selling price to about 66 euros from 63 euros in lastyear’s fourth quarter. Volumes are likely to be little changedfrom last year at 129 million units, pushing Nokia’s reportedmarket share closer to 30 percent from 35 percent a year ago.
Nokia last year revised its market-share methodology tobetter account for small Chinese factories making unbrandedbasic phones.
“We find growth in 2011 in smartphones and in the lowend,” said Helena Nordman-Knutson, a Stockholm-based analyst atOehman.
Apple continues to set the pace for the industry, selling16.2 million iPhones last quarter to produce handset revenues of$10.5 billion. That approaches Nokia’s forecast of 8.2 billionto 8.7 billion euros ($11.1 billion to $11.7 billion) forfourth-quarter devices and services sales.
HTC Corp., the Taiwan-based maker of high-end Androidsmartphones, doubled its fourth-quarter net income as it sold9.1 million handsets at an average price of $364.
Samsung Electronics Co., the world’s second-biggest handsetmaker after Nokia, sold 10 million units of the Galaxy S, anAndroid model that competes with the N8, since its June debut.
“Let’s see what Mr. Elop says in London; I’m sure he willprovide some nice one-liners and say the right things, but oddsare pretty low that the market would fundamentally change itsview of Nokia,” said SEB Enskilda’s Nystroem.
Nokia will report earnings at about 1 p.m. local timetomorrow, with a conference call at 3 p.m. that can be monitoredon the company’s website.