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June 17, 2010

There's now no more doubt that Nokia continues to struggle a lot among its many competitors in the smartphone segment of the wireless industry, and things look like they may get worse before they get any better, at least for now, according to the company's latest public statement.

In a note to the Wall Street community, Nokia actually downgraded the financial outlook for its wireless devices and services division for the second quarter and full year of 2010.

Nokia added that "multiple factors are negatively impacting Nokia's business to a greater extent than previously expected in 2009."

However, it would be difficult to conclude at this time that most of these factors have come as a surprise to the world's largest maker of mobile phones and wireless devices.

In it's downgrade, Nokia didn't shy away from the fact that the "competitive environment" is taking its toll. Indeed, the company listed that top among its negative factors, but points out that the most damaging competition is "particularly at the high-end of the market."

So recently, Nokia has been shifting its "product mix towards somewhat lower gross margin products," the company wrote. Lastly, but not least, the severe depreciation of the euro in the last few months is greatly affecting Nokia's bottom line as well, the company was quick to point out.

Nokia pegged its wireless devices and services' net sales to be "at the lower end of, or slightly below" the previously expected range of 6.7 billion to 7.2 billion euros for the current quarter. Nokia said the change is "primarily due to lower than previously expected average selling prices and mobile device volumes at home and abroad."

For the full year 2010, the company now expects its mobile device value market share to be slightly lower compared to last year, primarily due to the competitive situation at the high-end of the market and shifts in product mix.

The company previously targeted an uptick in is mobile device market share year-over-year, but now it looks like this won't happen anytime soon.

Apple's iPhones, its iOS and Google's Android operating system are all the rage these days and the writing has been on the wall for Nokia to read loud and clear for some time now.

And at the same time, BlackBerry's Research in Motion appears to be getting the message as it continues to push new wireless device lineups into market as fast as it can with all the resources the company has.

Most recently, the Waterloo, Ontario-based company is rumored to be launching a small tablet PC later in 2010 and new smartphone in a new form factor with a touchscreen and slide-out Qwerty keyboard that is expected sometime in mid-July or early August.

It's a classic case of what comes first. Mobile apps developers are generally well motivated to invest time, energy and resources into mobile platforms that are most popular with wireless consumers, which in turn makes their apps more appealing and more broadly distributed, while customers are inclined to embrace platforms that have the most exciting and well-executed apps.

Nokia mobile apps developers now are saying that the future of Nokia's smartphone segment is unclear and that its Ovi Store is clunky. Not a good thing!

In fact Bloomberg aptly reported that "the world's largest mobile-phone maker's failure to lure apps developers, whose products help sell iPhones and Android devices, adds to the perception that its devices are behind the devices."

Bloomberg also pointed out that "Nokia's stock has dropped over 50 percent since Apple opened its App Store on July 11, 2008."

With those kind of numbers, it's hard to understand that Nokia doesn't know what the problem is and where it stands the best chance to recoup some of its lost market share.

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Source: Bloomberg.