Confidence in Nokia rattled, but CEO bullish on Windows Phone 7

It’s not getting any better for Nokia. The Finnish handset giant saw its share price continue to plummet after the company’s announcement that its second-quarter sales would be far worse than previously expected.

Following the announcement, the mobile phone giant’s share price dropped more than 10 percent around midday to 4.27 euros a share, but regained most of that loss by closing.

The price regain came mostly amidst rumours that software giant Microsoft is planning to buy out Nokia’s mobile business for US$19-billion.

Nokia’s beleaguered CEO, Stephen Elop, has denied the rumours calling them “baseless”.

Over the past few years Nokia, a by-word for mobile phones in certain countries, has seen its market share dwindle and investor confidence plummet with it. The company’s stocks are at its lowest in 13 years, according to industry reports.

The company announced recently that its global market share in the first quarter of this financial year had fallen to 29 percent from 33 percent a year earlier, and compared with 40 percent in the first half of 2008.

According to Reuters, Nokia “continues to suffer from mounting competition and warned on Tuesday it expects net sales from its devices and services business in the second quarter to be ‘substantially below’ its previous forecast…”

The inability of the company to fully capitalise on its OVI store, resulting in the decision to run all its future smartphones on the Windows Phone platform, has only added to growing woes.

Though Elop, himself a former Microsoft employee, has attempted to explain away the issues and nerves surrounding the transition from the company’s Symbian smartphone platform to Windows Phone, others are less certain.

According to Bloomberg, Elop has assured investors that he has “increased confidence” that the first Windows Phone 7 based Nokia handset can be shipped in the final quarter. Elop also has to deal with the problem of consumers abandoning its Symbian handsets in favour of Apple’s iOS and Google’s Android.

In an interview with Bloomberg, London-based analyst Ben Wood said, “No question he [Elop] inherited a situation considerably worse than he’d anticipated. Common courtesy would dictate that they’d give him a year, but I think the critical point will be when the new strategy is implemented in 2012. That’s when he absolutely needs to deliver.”

Another London-based analyst with Alexander Peterc Exane BNP Paribas refers to Nokia’s Windows Phone 7 move as “jumping into icy water”.

“They could have worked on Windows in the background and provided moral support to Symbian while it was the only platform they had to offer. What if the Windows phone doesn’t sell?” says Peterc.