Nokia warns of sales slump, confirms Microsoft Windows Phone in Q4

Nokia has warned that sales of its mobile phones will "substantially" drop in the second quarter of 2011 due to its current integration with Microsoft.

Nokia has warned that sales of its mobile phones will "substantially" drop in the second quarter of 2011 due to its current integration with Microsoft.

In a 6-K document filing with the US Securities and Exchange Commission (SEC), Nokia cancelled its annual outlook and said it expects device and services sales to be "substantially below" anticipated sales of up to E6.6bn (£5.8bn) for the second quarter of 2011. The company expects its operating margin "could be around breakeven" for the quarter.

The Financial Times is reporting that shares in Nokia fell to a 13-year low following the phone maker's announcement.

"Strategy transitions are difficult. We recognise the need to deliver great mobile products, and therefore we must accelerate the pace of our transition," said Stephen Elop, president and CEO of Nokia.

Nokia Windows Phone

Nokia and Microsoft confirmed a strategic partnership in February, with Nokia adopting Windows Phone as its primary smartphone strategy and Bing as its search engine. Nokia will also fold its Ovi store into Microsoft's online Marketplace.

"Our teams are aligned, and we have increased confidence that we will ship our first Nokia product with Windows Phone in the fourth quarter of 2011," added Elop.

The company said in the SEC filing that it is struggling after increased competition in the market, a shift towards devices with lower selling prices and "pricing tactics by Nokia and certain competitors".

At Microsoft's preview of its Mango version of Windows Phone 7 OS, Tony Cripps, principal analyst at Ovum, said Nokia will be crucial to Microsoft's success as the only manufacturer "completely committed" to Microsoft's OS platform.

Return on investment doubtful

Nokia will continue to invest in its Symbian product portfolio and started shipping its dual-SIM devices last week.

Previously, Nokia outlined the risks of partnering with Microsoft, including a "substantial reduction" to its staff and loss of market share.

While the Finnish company confirmed its commitment to the open source mobile operating system, MeeGo, and plans to sell 150 million Symbian devices in the next few years, it says it may not be able to secure a return on investment (ROI) for these platforms.

The Unite union recently slammed Nokia's plans to slash 700 jobs in the UK by the end of 2012 as part of a 7,000 worldwide job shedding exercise.

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