The cellphone world's stumbling giant

Nokia's Q4 profit falls 'only' 21 percent; weak forecast slams shares

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Sometimes you have to wonder if Stephen Elop knew what he was getting himself into when he left Microsoft to become CEO of Finnish handset maker Nokia.

Since taking over last September, the 47-year-old former Redmond executive has presided over nothing but bad news for a company that has been caught flat-footed by the smartphone revolution begun by Apple's iPhone in 2007.

(Also see: Nokia joins Microsoft in blowing smartphone holiday shopping sales)

Thursday was no different as Nokia reported a 21 percent drop in fourth-quarter profit to 745 million euros ($1.02 billion), or 20 European cents a share, from 948 million euros, or 26 cents a share, in the year-ago quarter. Revenue increased 6 percent to 12.7 billion euros from 12 billion.

Consensus estimates called for earnings of 18 cents a share.

Despite beating forecasts, Nokia shares (NYSE: NOK) were down 26 cents, or 2.4 percent, to 10.48 in early trading, mostly due to Elop's warning during a conference call that sales and margins for the company's handsets would weaken in the current quarter.

It also didn't help that Elop, the first non-Finn to run Nokia, said the company had a "fundamental competitiveness problem overall." Hardly a news flash to investors, but you get the impression that Elop really doesn't know what to do about it, other than calling for an "attitudinal change" at the company.

The crux of Nokia's problem is its archaic Symbian mobile operating system, which the company seems reluctant to let go in favor of either Google's Android or even Microsoft's Windows Phone 7, both of which are able to deliver the kind of smartphone performance consumers in mature markets demand.

Nokia still is the top seller of cellphones in the world, but its share dropped to 34 percent last year from 32 percent in 2009.

In addition to losing market share, Nokia has had trouble getting products out the door. Despite announcing MeeGo, a high-end mobile software platform, nearly a year ago, Elop said MeeGo devices would be delayed until later this year. MeeGo phones were expected to ship in 2010.

Elop said Thursday that he would unveil a new strategy for Nokia during an investor meeting in London in two weeks. Don't expect an instant turnaround strategy. Nokia has a long slog ahead.

Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.

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