Nokia Stocks Plummet after Disappointing Sales Forecast

by Matt Klassen on June 3, 2011

It truly looks like Nokia’s bubble has burst; as the company watched its stocks take a veritable nosedive yesterday following substandard sales forecasts. Not that we didn’t see this coming, as the Finnish cellphone company has seemingly made all the wrong moves over the past year, adopting new mobile operating systems only to scuttle them months later, hiring and firing the wrong people, puts all its eggs in the wrong smartphone basket, and then finally screwing over all its current customers and partners by dumping Symbian in favour of Microsoft.

The nosedive in its stock valuation was triggered when Nokia announced that it was anticipating the sales for its Devices & Services division to be “substantially” lower than the estimate of 6.1 billion to 6.6 billion Euros ($8.8 billion to $9.5 billion) it gave back in April—evidence of yet another area where Nokia struggles: predicting trends.

But who’s to blame for these disappointing sales forecasts? Needing to quickly find a scapegoat upon which to lay the blame for this sales disaster, Nokia decided to find several, blaming everyone and everything—except itself of course—for its current predicament.

While I’ve only been covering the mobile telecommunications scene for a few years now, I simply can’t wrap my head around how Nokia ever became successful in the first place. Clearly its strategy of putting affordable cellphones in the hands of every farmer and fisherman from here to Timbuktu has paid some dividends, but its becoming increasingly obvious to me that Nokia no grasp on the realities of the mobile market, nor the ability to respond to changing consumer interest.

Truly it seems that either Nokia is too arrogant or too ignorant about the market it operates in, or perhaps a mixture of the two.

Case and point, one of the many reasons that Nokia pulled out of its hat to explain the disappointing sales forecasts is the actual selling price of their products, a price that has been significantly lower than the company originally anticipated.

This means that since April Nokia has realized two things: 1) The actual prices of its competitor’s devices and, 2) the price ceiling that customers are willing to pay for mobile technology. Of course it’s absolutely crucial to know both these things when making a sales forecast, which makes me wonder why Nokia didn’t know them before.

Beyond that, Nokia seems to be confused when faced with its own marketing strategy turned against it. To wit: Nokia established its global dominance on a strategy involving lower end phones in lower end markets; selling many lower priced phones instead of one or two higher priced smartphones (the latter being Apple’s highly successful strategy).

Faced with the growing smartphone market, however, Nokia changed its plan, dubbed several successive phones as its flagship mobile device, and put all its R&D eggs in a few small baskets. Now with trends in the smartphone market leaning back towards quantity over quality—that is, lower selling prices and lower gross margins per device—Nokia seems bewildered, again claiming one reason for its lower sales forecasts being its need to match these sort of pricing and sales tactics utilized by its competitors.

In the end, I’m truly trying to wrap my head around Nokia, a company that continues to be unable or unwilling to develop and implement the strategies necessary to succeed in the current mobile market.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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