Nokia, going down down down

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nokiaOkay forgive me for massacring a fine song by Bruce Springsteen. Nokia is in such deep do-doo and there is no end of it. The company announced its second quarter results and well, how to put it politely – they were awful. of course you would see reports that say, profits up, sales down etc. That’s not the complete story. For instance operating margin is down to 13.7% from forecast 14.3%. Trust me that’s not good, because that’s the money you need. Handset volumes were off by 4 million from the forecast 49.2 million for the quarter.

And are unlikely to get any better. Just to give you a little perspective: Nokia estimates (not my or analyst numbers) that in the second quarter, the total market was around 148 million cellphones -up 48% YOY. This is even higher than 141 million the first quarter 2004, or 100 million in the second quarter of 2003. This is a great news for the industry, but not so good news for Nokia because others are sucking up the upside. Here is a perfect example: Sony Ericsson.

While Nokia stunk up the joint this morning, Sony Ericsson reported pretty decent results.  The company came in with earnings of €113M versus consensus of €97M.  Revenues for the quarter were €1.5B.  Handset shipments were strong, coming in at 10.4M versus 8.8M in 1Q04. On a day when NOK laid another egg, Sony Ericsson reported strong 2Q04 handset numbers.  Company also raised its expectations for industry handset shipments, which we believe bodes well for a strong 2004. (Loop Capital)

Now a little whole ago, I had posted this link. Tip of the hat to Loop Capital. They predicted a decline in Motorola market share, well that’s exactly what happened.Samsung, LG and El Cjeapo Chinese arg slowly and slowly grinding down the company. My Business 2.0 colleague Matt Maier in his excellent wireless report pointed out that even Moto is on a comeback with new handsets. Nokia, on the other hand is dicking around with badly designed phones, which despite a solid OS are well un-phone line.

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Might be time for a change of leadership. I listened to this quarter’s call and the last and the thing I noticed was how much less arrogant the CEO was. Clearly getting your butt kicked for two quarters may have done some good. But maybe they just need some new leadership – I mean here’s a company that couldn’t be in a better position from a brand perspective (until recently), and has a huge amount of cash on the balance sheet to give them a lot of options. The stock got pummelled this morning, but is already up off the floor – after all, with about $3/share, the company has to be worth at least $11-12/share. My solution: out with the CEO, out with the current design team and bring in a new set of designers (hell, hire away the whole team from one of the other companies) and get down to producing great phones again. That’s the only solution – just make sure you don’t hurt margins too much.

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