The market was responding to the warning from Nokia (NYSE:NOK) today that in the second quarter the company will face pressure on its lower end products in China and Europe, which had been the short-term hope of the company while it transfers to the Windows Phone 7 from Microsoft (NASDAQ:MSFT) in the smartphone segment.
Nokia said sales from its devices and services division would only break even for the quarter, far below the estimated €6.1 billion to €6.6 billion it had projected.
Many are acting surprised by this, but it had to be expected as the company moves toward the more lucrative smartphone market as its major strategy.
But the idea was for Elop and Nokia to reasonably defend its low-end phones while it made that transition; something apparently they're having a difficult time doing.
In the first quarter Nokia's operating profit in the devices and services segment was $985.6 million. This quarter the company may only break even, suggesting possible losses or very meager gains.
Naysayers are already making the entire strategy of Nokia look questionable, as to its shift to Microsoft, but again, this can't really come as a surprise, because the company knew its competitors were going to come after them in the low-end market while they transitioned to the more lucrative smartphone market.
All the announcement today does is confirm what most already knew, although it's being peddled as a surprise.
The only real question was how deeply Nokia was going to be affected during the transition, not if it was going to be affected.
Either way, the market is responding as if it was caught off guard and is punishing the company today.
Shares in New York are trading at $7.05, falling $1.14, or 13.96 percent, as of 1:13 PM EDT.
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