Nokia Falls on Weak Supplier Outlook (NOK, STM, ERIC, MSFT)

Shares of Nokia Corp. (NYSE: NOK) are tumbling today following a glum forecast from one of the company’s main chip suppliers. ST-Ericsson, a joint venture between STMicroelectronics N.V. (NYSE: STM) and LM Ericsson Telephone Co. (NASDAQ: ERIC) and a main supplier to Nokia, reported earnings yesterday and included the following information about the current quarter:

For the first quarter 2012, ST-Ericsson expects a very significant sequential decline in net sales, resulting from a combination of higher inventory at some of our customers, further weakening of legacy product sales, the effect of first quarter seasonality as well as the reduction, in the short term, of new product sales with one of our largest customers.

Though unnamed, Nokia is believed to be the customer ST-Ericsson is referring to here.

There is also a belief that Nokia will have to cut its rich 8.6% dividend yield as the company tries to conserve cash for the coming launch of its new smartphones using the Windows Phone 8 operating system from Microsoft Corp. (NASDAQ: MSFT). Lagging sales of the company’s cheaper feature phones aren’t helping either.

Nokia’s ADRs are down nearly -7.5% today at $5.31 in a 52-week range of $4.46-$11.75.

Paul Ausick