Why Nokia Shares Got Crushed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Nokia (NYSE: NOK  ) plunged 14% in intraday trading Wednesday after the embattled Finnish mobile phone giant cut its quarterly outlook yet again.

So what: The stock has been crushed under intense pressure from high-end smart phone gorillas like Apple, but today's warning suggests that even Nokia's low-end handsets are facing the same problem internationally. Emerging markets are shifting toward inexpensive smartphones more rapidly than expected, making Nokia even more susceptible to market share losses than investors had thought.

Now what: Management now sees a first-quarter negative operating margin of 3% in its handset business -- versus its previous break-even guidance -- and about the same or below for the second quarter. "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. Given the gale-force headwinds working against Nokia, I wouldn't exactly bet on the success of that transition.  

Interested in more info on Nokia? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 11, 2012, at 9:51 PM, italianceltic wrote:

    If emerging markets are shifting towards less expensive handsets, then that will hurt APPL more than NOK mid to long term.

    I like the fact that Nokia is proactive about announcing glitches and provides patches quickly. APPL is still not admitting that their once ignored platform is now being targeted by script kiddies and crackers.

  • Report this Comment On April 16, 2012, at 11:06 AM, BruceInCola wrote:

    That sentence stopped me as well...either it's a typo, and he meant "Emerging markets are shifting toward expensive smartphones more rapidly than expected", or he is talking about smartphones even more inexpensive than Nokia's.

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