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Nokia Falls on Elop’s First Day on N8 Speculation

Nokia CEO Stephen Elop
New CEO Stephen Elop has to get the devices division churning out products more quickly to catch up with Apple's three-year-old iPhone. Photographer: Chris Ratcliffe/Bloomberg

Nokia Oyj shares tumbled on Chief Executive Officer Stephen Elop’s first day in the job on reports the world’s biggest maker of mobile phones is delaying shipment of the N8, its newest flagship smartphone.

The touchscreen N8 is the latest effort by Nokia to win back market share from Apple Inc.’s iPhone and devices based on Google Inc.’s Android. Nokia may push back shipment because of software glitches, online industry websites Electronista and Endgadget reported. Nokia denied this, and spokesman Doug Dawson said the N8 will be shipped by month-end, as planned.

“This is the flagship model, and if there are software bugs it doesn’t augur well for what this platform can deliver,” said Lee Simpson, an analyst at Jefferies Intl Ltd. in London. “Timely product launches are such a chronic problem for Nokia. It has all the components but its execution is woeful.”

With handsets that haven’t caught up to Apple’s three-year-old iPhone, even after schedule delays, new CEO Elop has to get the devices division churning out products more quickly. Nokia shares have sunk more than 60 percent since Apple unveiled the iPhone in June 2007 and Nokia’s piece of the smartphone market, the industry’s fastest-growing part, shrank.

The struggle to develop a smartphone with the same mass appeal forced Espoo, Finland-based Nokia to cut prices, sacrificing profits to defend its market share.

Nokia slid closed 4.5 percent lower in Helsinki at 7.5 euros, its biggest drop in more than three months.

Profit Targets

Nokia said in July that the operating margin in devices could fall as low as 7 percent in the third quarter as it prepared to release the N8. The margin was 12.5 percent last year and 18.2 percent in 2008. In July, Nokia posted a 40 percent drop in second-quarter profit.

“If they start shipping in mid-October they can’t book those orders in the third-quarter results, and if a few hundred thousand units are involved, it could jeopardize third-quarter profitability targets,” said Michael Schroeder, an analyst at FIM Bank in Helsinki.

Nokia showcased the N8 at its annual Nokia World event last week, and said the new smartphone got the most pre-orders the company has had for a product. Nokia has taken “knocks” in past years and the N8 and other new smartphones showcased at the London event will help to win back market share, Anssi Vanjoki, the company’s smartphones chief, said at the event.

“We had targeted our online pre-order customers to receive their N8s by the end of September,” Nokia said on its blog today. “As it can take time from the beginning of shipment to arriving at their doorstep, in full transparency, we have advised our pre-order customers that they should expect their new Nokia N8 in October.”

The N8

The N8 features a 12-megapixel camera, high-definition video recording, film-editing software, navigable 3-D maps and the ability to mirror its display on a television screen. Users can customize their phones to display Facebook and Twitter feeds on the top screen. They can also integrate all their social networking into a single feed, using Nokia software or third-party applications such as Gravity.

At 37.4 percent, Nokia has the biggest share of the smartphones market, according to second-quarter figures from Gartner Inc. Still, Apple and Android devices have eroded its dominance from 45 percent a year ago, as they expanded the market for smartphones.

Apple became identified with the transformation of the mobile phone from a handset into an all-purpose digital assistant, as it accumulated hundreds of thousands of apps for everything from free phone calling to travel dictionaries and virtual musical instruments -- nearly all from third parties.

Bad Sentiment

Nokia was slow to catch the wave. Its plethora of devices with multiple configurations made writing apps more difficult, time-consuming and expensive, according to developers.

Reports of the N8 delays are hurting perception again, said Saverio Papagno, an analyst at AZ Fund Management in Luxembourg.

“The impact of the delay isn’t that significant in terms of numbers, but the news is negative for the sentiment around Nokia,” he said.

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