Nokia shareholders are gearing up for a massive suit against the struggling mobile company, primarily over the company’s big bet on Windows’ mobile operating system.
In documents filed yesterday (which we’ve embedded below, you’re welcome), certain shareholders are claiming Nokia “told investors that Nokia’s conversion to a Windows platform would halt its deteriorating position in the smartphone market. It did not. This became apparent on April 11, 2012, when Nokia disclosed that its first quarter performance would be worse than expected.”
That might actually be a bit of an understatement. Nokia actually reported a huge $1.7 billion loss for the quarter — a figure so abysmal the company’s head of sales was forced to resign in disgrace. Ouch.
Then, there was the matter of the $100 rebate for Lumia 900 units due to a glitch in the software. The rebate essentially made the phones free to consumers who had purchased it.
Nokia CEO Stephen Elop told shareholders much of the loss for Q1 was due to one-time restructuring costs, but apparently, shareholders aren’t having it. The lawsuit states Nokia executives who were making wildly positive assertions about the company’s switch to Microsoft’s mobile OS “had actual knowledge of the misleading nature of the statements they made or acted in reckless disregard of the true information known to them at the time… This artificially inflated the price of Nokia’s securities and operated as a fraud or deceit.”
The alleged fraud led to massive losses for shareholders who bought Nokia stock at the time. Here’s a chart we made showing Nokia stock performance from the launch of the company’s first two Windows Phone handsets to today:
While neither the above chart nor the lawsuit cast a particularly rosy glow on Nokia, Microsoft is also tarnished by the poor performance of the Lumia line. After all, much was made by both companies of Nokia’s “we’re putting all our eggs in one basket” bet on Windows Phone, and a lot of marketing money was sunk into the phones, the platform, and the partnership. As the flagship devices for Microsoft’s mobile revamp, the Lumia line’s apparent tanking of Nokia stock sends a huge red flag about the future of Windows Phone altogether.
The suit is brought by Robert Chmielinski, a Boston-area attorney who is also a Nokia shareholder. In a brief response, Nokia states, “Nokia is reviewing the allegations contained in the complaint and believes that they are without merit. Nokia will defend itself against the complaint.”
Here’s the full filing:
Top image courtesy of 2jenn, Shutterstock
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