Nokia’s Shares Tumble as Analysts Lower Lumia Sales Forecasts

by Trefis Team
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Nokia’s (NYSE:NOK) shares have tumbled almost 15% in two days as analysts cut their sales forecasts for the company’s latest Windows based smartphone, the Lumia 800, which went on sale in six European markets this month. [1] A week back, Nokia announced in its company blog that it expects the Lumia to be a huge hit considering the level of pre-orders and customer reaction it saw on the opening day. [2] The flailing mobile manufacturer has seen its market share decline in recent years, especially in the developing markets, as Apple’s (NASDAQ:AAPL) iPhone and Google’s (NASDAQ:GOOG) Android-based phones have piled on pressure in the smartphone market.

Since its launch late last month, the Lumia 800 has been the subject of rave critical reviews and praise from many quarters which saw a surge in market expectations and hopes for a turnaround saw optimism return to the stock. However, two analysts have now come out with reports that they find the sales of the smartphone to be surprisingly weak and much lower than previously anticipated.

In light of the massive selloff, our price estimate of $7 for Nokia stock is now 25% ahead of market price.

See our complete analysis for Nokia stock here

Market share may continue southward journey

The first signs of trouble surfaced on Monday, when Forbes reported a Bernstein Research analyst Pierre Ferragu point out in a research note that he finds Google Trends showing the buzz level on the Lumia similar to the company’s earlier poor selling smartphone, the N8, which was launched a year ago. He reckons that the Lumia will be a similar failure too.  His findings were corroborated later by James Faucette of the Pacific Crest Securities, who wrote that Nokia may have shipped less than a million phones for the quarter (half of his initial estimates) and will be able to sell only 500,000 of those to the customers. Nokia has so far not commented on these reports. ((Nokia: Will Anyone Buy The Windows-Based Lumia Phones?, Forbes, November 21st, 2011))

Nokia’s market share has been on a decline for many quarters but we had expected the company’s latest smartphone line to help it stem the loss in the coming quarters. It is too early to say if the initial demand for the Lumia has fizzled out or not, as we have also seen reports of Lumia topping sales charts in France, selling out in Netherlands and generating huge pre-order demand at Orange. [3] [4] [5] However, if the initial response has fizzled out as some analysts seem to think, it might mean that more pain is in store for Nokia as market share declines further in the coming quarters.

By deciding to gradually phase out its old Symbian platform, dumping the MeeGo OS and forging a partnership with Microsoft, Nokia is betting everything on the Windows OS, an operating system that hasn’t been able to compete in a market dominated by Android and iOS. While the Windows platform is a significant improvement over the older Symbian platform, it will take a lot more than just a good operating system to ween customers familiar with the respective OSs away from the Android-based phones and the iPhone which boast a much richer ecosystem of apps and content.

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  1. Nokia shares decline on Analyst report of Lower-Than-Expected Lumia Sales, Bloomberg, November 22nd, 2011 []
  2. Nokia hails Lumia 800 a hit, Company blog, November 16th, 2011 []
  3. Nokia Lumia 800 Tops Le Charts, WSJ, November 6th,2011 []
  4. Nokia Lumia Sells Out in the Netherlands,, November 18th, 2011 []
  5. Nokia Lumia 800 hits UK stores, preorder demand leaves Orange UK glowing, Engadget, November 16th, 2011 []
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