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Nokia Reduces Forecast, Eyes ’11 Winbows Phone

Espoo, Finland — Nokia made an “unexpected change” to its
second-quarter forecast, saying it expects net sales of devices and services to
be “substantially below” the previous forecast of 6.1 – 6.6 billion euros.

Nokia blamed the change on declining
unit sales and lower average selling prices.

 Operating margins for the quarter are now
forecast to fall to “around breakeven” and be “substantially below” the
previous expected range of 6 percent to 9 percent.

The company also said it “remains
pleased with its progress” on Windows Phone and “has increased confidence that
the first Nokia product with Windows Phone will ship in the fourth quarter
2011.” The company did not say in which countries it would ship.

Nokia revised its forecast
because multiple factors occurring in the second quarter hurt business “to a
greater extent than previously expected,” particularly market developments in
China and Europe, shifting sales mixes toward lower average selling prices and
lower gross margins, and “pricing tactics by Nokia and certain competitors,”
the company said.

Because of the revised forecast,
the company said it is “taking immediate action” to address the situation,
including “price actions on its current smartphone portfolio” and “intensifying
its focus on retail point-of-sales marketing.” Nokia also noted that “its
high-level strategic objectives and targets remain unchanged,” including a
reduction in devices and services operating expenses by 1 billion Euros for
full fiscal 2013 compared to 2010. The company said it “plans to implement these
reductions as quickly and effectively as possible.”

Nokia’s previously stated
objectives also include making Windows Phone the focus of its growth strategy
while continuing to invest in the Symbian smartphone platform.

The company will no longer provide
annual targets for fiscal 2011 but will provide short-term quarterly forecasts
in its interim reports as well as annual targets “when circumstances allow,”
the company said.