Nokia Oyj (NOK:US) shares tumbled the most in almost three months after the introduction of two Lumia smartphones with Microsoft Corp.’s (MSFT:US) new Windows Phone software failed to impress investors.
The stock fell 13 percent to 1.99 euros in Helsinki, the biggest one-day decline since June 14. The stock had rallied 96 percent from an 18-year low on July 18 through Aug. 27 in anticipation of the new phones.
Nokia is counting on its partnership with Redmond, Washington-based Microsoft to help boost sales and return the company to profitability after falling behind its rivals. The Espoo, Finland-based company has identified the U.S. as a market where it has to win back users and gain momentum in its attempted global comeback bid. The question is whether the new phones break enough ground, said Geoff Blaber, an analyst at CCS Insight in London.
“The challenge Nokia will face is that consumers will struggle to see how the hardware has really stepped forward from the previous generation of products,” he said in an interview.
Nokia Chief Executive Officer Stephen Elop showed off the new phones at a news conference in New York. The Lumia 920 has a 4.5-inch (11-cm) screen and an 8.7-megapixel camera with a so- called floating lens that uses software for image stabilization. The Lumia 820, whose screen measures 4.3 inches, has an 8- megapixel camera without the optics software. Both will go on sale in the fourth quarter of this year.
“Today is a very important step, and there are more important steps ahead,” Elop said in an interview. “There’s no single turning point. We need to succeed with this and take it to the next step.”
The announcement of the Lumia models gives Nokia a brief head start before two top rivals present their own newest handsets. Motorola Mobility, a unit of Google Inc. (GOOG:US), is planning to unveil one of the first full-screen phones in the U.S. later today in New York, according to a person familiar with the plan. Apple Inc. (AAPL:US), maker of the iPhone, is planning its own introduction on Sept. 12.
“The U.S. is very important,” Elop said. “These trends we’ve seen in our industry have been starting here and moving east.”
The 920, shown at the conference today in a bright yellow casing, has software called City Lens that allows users to hold the phone camera up to see the names of restaurants and shops overlaid on the surfaces of buildings. Users can tap a building for more details and can call to make reservations. Nokia’s maps software has similar augmented reality software that shows customers nearby points of interest when they hold the phone up after setting their route.
The phone, which can recharge wirelessly, also comes in red and gray. Its touch screen is sensitive enough to detect fingers through gloves, said Kevin Shields, a Nokia senior vice president, at today’s event.
Nokia, whose credit rating was cut to junk this year by the three biggest rating companies, has announced more than 20,000 job cuts and closed production and research sites in an attempt to put the company on profitable footing. Nokia, whose U.S. market share peaked at 32 percent in 2001, accounted for about 2 percent of smartphone purchases in the second quarter, according to Strategy Analytics. The iPhone and devices using Google’s Android software combined for about 90 percent.
The growth of the $219.1 billion smartphone market has aided Nokia. Even as momentum slowed to the lowest in almost three years, global smartphone shipments climbed 32 percent to 146 million units in the second quarter, according to Strategy Analytics.
While Lumia sales have been dwarfed by competitors, early shipments have exceeded some analysts’ estimates. Nokia sold 4 million of the devices globally in the second quarter, doubling from the first quarter and beating the 3.8 million analysts on average projected. Nokia is expected to sell 3.4 million Windows-based phones this quarter and 5.9 million in the fourth quarter, Sandeep Deshpande, a London-based analyst at JPMorgan Chase & Co., wrote in an Aug. 30 e-mail.
Nokia will go through a “transition period” in the third quarter, with Lumia 900 handset sales slowing as consumers anticipate the new models, Elop said.
While Microsoft has seen shipments of Windows Phones more than double, they remain tiny, with its 5.4 million units sold in the second quarter representing a 3.5 percent share of the market, according to researcher IDC.
“Nothing in the space is going to change dramatically overnight,” said Michael Gartenberg, an analyst at Gartner Inc. “What Microsoft and Nokia need to do is continually show evolution and innovation. They’ve got all the pieces and parts to stand out from the market. Now they have to explain why different is better. They’re going to have to spend a lot of time, effort and money explaining that to consumers.”
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