Why Nokia Shares Got Crushed

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Nokia (NYS: NOK) plunged 14% in intraday trading Wednesday after the embattled Finnish mobile phone giant cut its quarterly outlook yet again.

So what: The stock has been crushed under intense pressure from high-end smart phone gorillas like Apple, but today's warning suggests that even Nokia's low-end handsets are facing the same problem internationally. Emerging markets are shifting toward inexpensive smartphones more rapidly than expected, making Nokia even more susceptible to market share losses than investors had thought.

Now what: Management now sees a first-quarter negative operating margin of 3% in its handset business -- versus its previous break-even guidance -- and about the same or below for the second quarter. "Our disappointing Devices & Services first quarter 2012 financial results and outlook for the second quarter 2012 illustrates that our Devices & Services business continues to be in the midst of transition," said CEO Stephen Elop. Given the gale-force headwinds working against Nokia, I wouldn't exactly bet on the success of that transition.  

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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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