Nokia dinged with shareholder lawsuit over poor Lumia sales
Finns: Allegations are 'without merit', we will defend ourselves
By Andrew Orlowski • In Financial News • At 17:59 GMT 4th May 2012
As sure as rain follows a Met Office drought warning, we can expect a share price crash to be followed by a shareholder lawsuit. Now it's Nokia's turn.
A class action suit naming Nokia's CEO Steve Elop, and CFO Timo Ihamuotila has been filed by New York law firm, and serial class action rottweilers, Robbins, Geller, Rudman & Dowd. It claims that Nokia acted fraudulently when it failed to "halt its deteriorating position in the smartphone market" but did not tell shareholders. Not surprisingly, Nokia issued a statement saying that the claims "are without merit" and the Finnish firm will contest the suit.
When Elop announced the first Nokia Windows phones last October, Nokia's share price hit $7.31 per share. But after the last quarter's results the share price crashed to $4.24.
"Two million Lumias in three months is not encouraging; that’s the same number that the Nokia N97 (a product which was a large-scale failure) shipped back in 2009, in first three months," the plaintiffs allege. "Today, if you bring a hit product to market, 5 million in three months should not be a problem (Samsung Galaxy S2). In addition, 10 million Symbian smartphones shipped was expected, but the 16 per cent gross margin in smartphones says these phones were shipped with big discounts in order to defend market shares."
Nokia's most recent loss was caused not by under-performing smartphones, but by a collapse in volumes and margins of its midrange products, particularly those in Asia. As the company put it, "lower seasonal demand for our feature phones and aggressive price competition".
This isn't mentioned in the lawsuit. Nor is an explanation of why sales of Symbian smartphones should have been maintained when Nokia had nothing new to offer its customers at the budget end of the market. ®