Nokia’s Stock Falls Despite Board’s Satisfaction With Services Strategy

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Nokia’s Stock Falls Despite Board’s Satisfaction With Services Strategy

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Nokia (NYSE: NOK) held its annual meeting today, and despite hearing increasing buzz from investors that a leadership change is in order, the handset-maker’s executive team appears to be intact and that the board is on the same page with the company’s strategy.

The company’s stock fell 45 cents, or nearly 4 percent in trading today. Much of the fears have to do with earnings, not so much the company’s market share. Nokia sold 432 million devices in 2009, more than its top three competitors combined. But the company has had to focus on low-cost handsets to maintain its leadership position. Nokia’s average selling price for all models has plummeted 44 percent in the past five years to 62 euros, Bloomberg reports.

CEO Olli-Pekka Kallasvuo told shareholders today: “The recession coincided with our transformation, as well as changes in our device portfolio. With all these factors together, it resulted in a decrease in operating profit and earnings per share, compared with 2008.”

The company has had three years to respond to Apple’s iPhone, but is still struggling to have an operating system in working order. The latest version of the Symbian OS has been delayed, and it just made plans in February to merge its higher-end OS with Intel’s to create MeeGo. In 2010 and beyond, Kallasvuo said today the company’s strategy is to focus on building fewer, more competitive products and to leverage global interest in apps to provide additional services, like navigation or mail. “We are working hard to reclaim leadership in high-end smartphones and mobile computers.” he said. “It is critical that we improve the customer experience with the usability of both our devices and our services.”

But regaining its smartphone position will be hard. In the first quarter, Nokia charged 155 euros on average for a smartphone, down from 190 euros nine months ago. If it continues to discount prices, it may look like the low-end handset provider—not an alternative to the iPhone. Nokia could focus on being a mass producer of cheaper, but good quality products, however, its research and development costs are completely out of line with that goal. Bloomberg points out that Nokia spent almost six times as much as Apple (NSDQ: AAPL) on R&D last year, and doesn’t have a competitive smartphone to show for it. How much longer can a budget of that size be allowed when the company’s market cap is around $44 billion, and Apple’s is at $230 billion?

For now, investors will have to be satisfied with Nokia’s 40 cents a share dividend because the board agrees with the strategy the company is taking. Jorma Ollila, Nokia’s chairman, said at the shareholders meeting that executives had the board’s full support. “We support management in this,” he said, according to Reuters.

By Tricia Duryee