Struggling Nokia's Woes Mount

Nokia announced sweeping changes, including 10,000 additional job cuts, and cut its earnings outlook for the third time in little over a year. WSJ's Ben Rooney reports. Photo: AP

Nokia Corp., until this year the world's largest maker of mobile phones, sparked fresh doubts about its viability Thursday by warning that its losses will be worse than the company expected just two months ago.

Shares in Nokia fell 18% in Helsinki on Thursday and have lost more than three-quarters of their value since Chief Executive Stephen Elop was brought in to turn around the company in September 2010.

The profit warning was the third in a little over a year for Nokia, which faces stiff competition from Apple Inc. and Google Inc. in the market for smartphones and from less-costly rivals that are doing a better job of selling basic phones to consumers in emerging markets. Nokia didn't predict Thursday when its losses might come to an end.

The worsening results raise further doubts about Mr. Elop's strategy to turn around the company by focusing on smartphones powered by Microsoft Corp.'s Windows operating system. Nokia rolled out its first phones under the partnership in October. Yet while generally well reviewed, they are sold in the U.S. at heavy discounts and haven't stemmed the slide.

Enlarge Image

Close

In an effort to cut costs as its market position erodes, Nokia said it will cut an additional 10,000 jobs in its mobile division by the end of next year. The cuts follow plans announced last year to eliminate about 14,000 jobs, but observers questioned whether it would be enough. Nokia's mobile-devices division employs 53,000 people, compared with 20,500 at rival Motorola Mobility Holdings, which Google bought this month.

Mr. Elop also shook up the company's marketing and mobile-phone leadership, naming his former Microsoft colleague and U.S. chief Chris Weber as head of sales.

Nokia, once one of the world's cutting-edge technology companies, failed to adjust quickly enough to key changes in how people used their phones. Analysts say that Samsung Electronics Co. of South Korea dethroned Nokia in the first quarter of the year as the world's biggest cellphone maker.

Nokia's failure to adapt to changing technology has spanned the globe. In the first quarter of this year, Nokia for the first time accounted for less than half of the total cellphone market in its home country of Finland, according to research firm IDC, which has been tracking the data since 2004. The company's market share of 48% in the first quarter was 15 percentage points lower than it was a year earlier while Samsung and Apple rapidly gained ground.

Meanwhile, in Indonesia, Nokia's market share plummeted from 52% in early 2010 to 24% early this year, according to IDC. Nokia lagged behind smaller competitors in launching "dual SIM" phones, which have been popular in developing countries for years because they let consumers save money by combining deals from two different service providers.

Related Reading

Heard: Nokia's Signal Is Fading Fast

The Source: More Pain Ahead for Nokia

For Finland, Hope In Start-Up Firms

Traders See Big Moves in Nokia's Future

India Real Time: Nokia Job Cuts May Not Impact India Much

Inside Nokia's Struggle Against iPhone 5/31/2012

Nokia Outspent Apple Nine Times on R&D 5/14/2012

Nokia Vows a Turnaround 5/3/2012

Nokia Needs a Game Changer 4/30/2012

Heard: Nokia Blings Up Luxury Sale 4/30/2012

Heard: Nokia—Cheap but Not Attractive 4/24/2012

Fitch Downgrades Nokia 4/24/2012

Tech Europe: The Nokia Phones You Loved ... and Hated 4/20/2012

China at Heart of Nokia's Troubles 4/19/2012

On Thursday, Nokia warned that the operating loss at its main mobile-devices unit would be larger than it had indicated earlier, saying it would post a negative margin greater than 3%. The company doesn't appear to be gaining much traction in the important smartphone market, saying competition had hit that business "to a somewhat greater extent than previously expected."

On a conference call, Mr. Elop said Nokia is getting new help from Microsoft to go after Android more aggressively at the low end of the smartphone market, where its rival is winning customers quickly.

The new job cuts are aimed at saving an additional €1.6 billion ($2 billion) in annual costs by the end of 2013, the company said. The new round of restructuring measures comes as the combination of Nokia's accelerating cash burn and its continued steep fall in handset sales are starting to fray investors' nerves.

Enlarge Image

Close

Reuters

Nokia employees in Finland arrived for a personnel briefing on Thursday. The company announced that it plans to shed 10,000 jobs.

Nokia held €4.87 billion in cash at the end of the first quarter, down €709 million from the end of the fourth quarter and off 24% from the same time last year. Restructuring efforts will cost an additional €1.25 billion by the end of 2013, the company said.

Standard & Poor's Ratings Services cut Nokia's credit rating to junk in late April, saying the company's cost cuts and new phones weren't likely to offset the rapid decline in its business.

Nokia, Nokia Phones, Chief Executive Stephen Elop, Apple Inc., Microsoft ebook download, Google Inc., Microsoft Corp.

Online.wsj.com