Nokia Literally Giving it Away

Nokia have made an interesting announcement on profit margins; they make 6.2% on their smartphones and 16.4% on basic phones.

The old,  basic phones that go to the pay as you go and emerging markets are reasonably profitable then, but their flagship phones have margins so thin you can almost see through them.

We need to remember that Nokia are in a stage of transition, with new Windows phones on the way the margins may well improve, but for the moment it looks like Nokia are having to give the goods away just to keep the production lines running.

Nokia’s second quarter earnings report is due tomorrow, and they’ve already announced that results will be “substantially below” ┬átheir earlier estimates.

Think about the language there, investor communication is usually deliberately vague and doesn’t tend to use strong wording, so the use of the word “substantially” suggests that there are some really big red numbers on tomorrow’s report. Perhaps more worryingly, Nokia said that they did not feel able to predict their performance for the rest of the year.

So to summarise:

Tiny margins

Earnings warnings

No idea what’s going on for the rest of the year.

 

Wow.

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