At $183 billion, Apple is the world’s most valuable brand, a title it claimed last year as well, though at that time the brand was worth $153.3 billion. In the ensuing year, it has grown another 19 percent. IBM ranked second with $116 billion in value. Google, which ranked second last year, this year swapped places with IBM, after its brand value slipped 3 percent year over year. With a $76.7 billion brand, Microsoft claimed fifth place, ranking below McDonalds — the only non-tech company in the top five.

The biggest year-over-year gain also went to a tech company: Facebook, which rose from No. 35 in 2011 to No. 19 in 2012. A meteoric rise, and one that spiked the company’s brand value 74 percent to $33.2 billion.

Nokia, which ranked 81st in brand value in Millward Brown’s 2011 study after a 28 percent year-over-year decline in value, fell even further in 2012. So far, in fact, that it seems to have fallen right off the chart. Not a surprise, really, given the company’s current situation. But worth noting just the same; as recently as 2008, Nokia was the world’s ninth most valuable brand.

According to the latest metrics from Gartner — which measure sales of handsets to customers, not shipments into the channel — Samsung sold 86.6 million mobile phones in the first quarter, 25.9 percent more than it sold during the same period a year ago. That was enough to give it a 20.7 percent share of the market, and to seize the title of “world’s largest mobile handset vendor” from Nokia, which sold 83.2 million cellphones during the quarter, as its market share slipped to 19.8 percent from 25.1 percent a year ago.

Unfortunate news for Nokia, which had been the market’s leader since 1998, but inevitable given the company’s recent decline and, perhaps, its choice of Windows Phone as an OS for its newest handsets.

Because what’s driving Samsung’s growth is Android. According to Gartner’s sales data, Samsung was by far the largest Android smartphone vendor, claiming nearly 44 percent of Android-based smartphone sales. Interestingly, no other Android phone manufacturer captured more than 10 percent of the market.

So, if Samsung commandeered the handset market’s top spot in the first quarter, and Nokia its second, who claimed third? Apple, which sold enough iPhones to capture 7.9 percent of the total mobile phone market.

As for mobile OS market share, Android continues to rule the market — 56 percent of smartphones sold to end users globally in the first quarter of 2012 run the OS, far more than the 22.9 percent running Apple’s iOS.

The Nokia 110 and 112 are both dual-SIM, 1.8-inch-screen phones that offer basic Internet access as well as connections to Facebook and Twitter and a collection of bundled games from Electronic Arts. Compression technology can help cut data use by as much as 90 percent, Nokia said.

“Today’s mobile phone users want a quick internet experience that allows them to discover great content and share it with their friends — but without being held back by high data costs,” Executive VP Mary McDowell said in a statement.

The 110 is priced at 35 euros and is set to ship this quarter, while the 112 is estimated to sell for 38 euros and is due to ship next quarter.

While Nokia’s woes in the smartphone market have been well documented, the company has also been losing ground in the lower-end feature-phone market — a key source of company profits.

Encouraging news for Nokia, which was recently sued — stupidly — by an irate shareholder over disappointing Lumia sales. Indeed, it’s McCourt’s impression that demand for the Lumia in the States is still quite good.

“Our conversations with store reps indicated no signs of Lumia demand ‘falling off a cliff’ following the reasonably strong launch week,” McCourt says. “Clearly, at $99 and with very noticeable retail store support from AT&T reps, the Lumia launch in the U.S. was built for volume.”

Certainly, Nokia sounds pleased with the device’s performance in the U.S. In an interview with PC Magazine earlier this week, the company’s U.S. president, Chris Weber, reiterated earlier claims that Nokia is selling Lumias as fast as it can make them.

“Demand has been outstripping supply for the first couple of weeks, and we’ve been working hard to rectify that,” Weber said. “The demand for cyan [phones] is significantly outpacing supply.”

Sadly, that doesn’t seem to be the case abroad. When Nokia last reported earnings, CEO Stephen Elop said that establishing momentum for the Lumia in Europe has been “challenging.” And according to Bernstein analyst Pierre Ferragu, that remains true today.

“Consumer interest in Nokia’s flagship peaked at very low levels and is now evaporating in European markets,” Ferragu said in a Wednesday note to clients. “The US remains for now an exception.”

“I think it is much to-do about nothing,” Sprint VP Fared Adib told AllThingsD in an interview on Tuesday. Customers sign up for two-year contracts, Adib said, and it makes sense for customers who want to have the latest technology get a device that will meet their needs throughout that time. People should be more concerned if Sprint weren’t doing that, he said.

“We’ve done this before,” he said. “So has every other carrier.”

Adib noted that Sprint’s LTE deployment, which will start with a few cities around midyear, will be faster than the rollout of prior technologies, including its 2G, 3G and WiMax networks.

Speaking of WiMax, Sprint may not be introducing new phones for its flagship brand, but it is now extending that technology to its Boost Mobile and Virgin Mobile prepaid services. Virgin and Boost both announced plans to start selling a WiMax device from HTC. (Virgin has a variant of the Evo 3D, while Boost will sell a phone similar to the traditional Evo 4G.)

The company has said it plans to continue offering WiMax service through at least 2015.

Also on Tuesday, Sprint announced a new bundle of family safety and security applications under the Sprint Guardian banner. The effort consists of a $10 per month service from Location Labs’ Safely unit and a $5 per month security service from Lookout.

Both services cover up to five devices, which could be a savings for families that have a bunch of Sprint phones.

Adding such services can help increase loyalty to Sprint among families with multiple devices — already a traditionally loyal group and a key source of revenue for all the major carriers.

“You might change phones and plans but you don’t change carriers,” Adib said of those customers.

One area where Sprint hasn’t been all that aggressive is in introducing devices running Microsoft’s Windows Phone operating system. Adib said that Sprint certainly took note of the slow initial sales globally for the first crop of Windows Phones.

Still, Adib said that the company is a longtime partner of Microsoft’s and expects to offer future Windows Phones, likely after the debut of Windows Phone 8.

“I don’t want to give you any specific dates,” he said.

But he said he is “very bullish” on Windows Phone overall and said the company has rapidly closed some of the gaps it had in terms of performance and capabilities. Adib said he has also been pleased to see the work Nokia has done in reintroducing itself in the U.S. with its first Lumia devices.

“I think we are going to continue to see that,” he said.

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Filed by Robert Chmielinski, the suit alleges Nokia misled investors by promising that its transition to Microsoft Windows Phone platform would reinvigorate its flagging smartphone sales.

“Defendants told investors that Nokia’s conversion to a Windows platform would halt its deteriorating position in the smartphone market. It did not,” the lawsuit states. “This became apparent on April 11, 2012, when Nokia disclosed that its first quarter performance would be worse than expected. Nokia expected its first quarter 2012 non-IFRS Devices & Services operating margin to fall by 3%, and projected first quarter 2012 Devices & Services net sales of €4.2 billion.”

The lawsuit further alleges that Nokia fumbled the launch of the Lumia 900, shipping it with a glitch that ultimately forced it to offer customers an automatic $100 refund, “making the phone essentially free.”

Which is true, of course. But how ironic is it that a shareholder outraged over the slow pace of Nokia’s nascent transition to Windows Phone is suing the company, a move that will arguably further slow that pace by distracting management and drain away further resources?

And c’mon: the Lumia line isn’t even a year old yet. It debuted in Europe last November.

Asinine.

Robbins Geller, the law firm representing Chmielinski, says it seeks to recover damages on behalf of all purchasers of Nokia’s shares.

Nokia, for its part, says it will defend itself against the suit, whose allegations it believes to be “without merit.”

Nokia on Wednesday filed patent infringement lawsuits against HTC, Research In Motion and ViewSonic in the U.S. and Germany. All told, there are 45 patents at issue, covering everything from dual-function antennas and multimode radios to application stores and data encryption.

“Many of these inventions are fundamental to Nokia products,” Nokia’s chief legal officer Louise Pentland said today in a statement. “We’d rather that other companies respect our intellectual property and compete using their own innovations, but as these actions show, we will not tolerate the unauthorized use of our inventions.”

Presumably, the company would be quite happy to tolerate authorized ones for licensing fees that would boost its flagging quarterly numbers. Which, for Nokia, is really what this is all about: establishing a new revenue stream while awaiting broader adoption of its new Lumia Windows Phones.

Reached for comment, RIM declined to offer one.

HTC had only this to say: “HTC has been a licensee of Nokia on wireless essential patents since 2003. We are waiting to receive a complaint and won’t have any comments until our legal team has received and reviewed it.”

ViewSonic has not yet replied.

India and Russia will be among the first markets to get the PureView, Nokia said. The company also said it was extending its exclusive camera deal with Germany’s Carl Zeiss, its longtime imaging partner, whose lenses power the PureView and the N8.

“We are getting much more than just the optics components from Carl Zeiss,” said Nokia head of imaging Juha Alakarhu, in a telephone interview. “This is really a true partnership with Carl Zeiss. They have a big role throughout the development of our cameras.”

Nokia is counting on imaging to remain as one of its selling points as it shifts its weight from its homegrown Symbian operating system to building phones based on Microsoft’s Windows Phone software. Nokia reiterated that it plans to adapt the PureView technology to future Windows Phones.

The company still isn’t going into any details on that front, nor is it saying when the first Windows Phones with the technology will ship. Nokia plans to sell the Symbian-based PureView in markets beyond Russia and India, but has said it does not plan to bring it to the U.S.

“We will bring PureView to future smartphones — all the parts in the product, from great optics [to the] processing, the whole experience,” Alakarhu said.

During a visit to Finland in February, AllThingsD was among the first outsiders to see the PureView, ahead of the formal launch of the device at that month’s Mobile World Congress.

Since then, Alakarhu said he has been traveling a lot with the phone, taking it on various work trips, including a recent visit to Indonesia, and this week’s May 1 celebrations in Finland. Alakarhu said he gets lots of amazed reactions, adding that he is probably most pleased that his usually critical photography enthusiast friends are impressed.

“I was able to show the photos, and I was happy to see their happy faces,” he said.

Nokia has also promised it has more photo tricks up its sleeve, though Alakarhu wouldn’t spill the beans.

“I probably shouldn’t say anything about our future surprises,” he said. “We are working hard on imaging technology.”

Nokia spent five years developing the camera technology behind the PureView.

“We now expect Nokia to report significantly lower margins and cash flows in 2012 than we had previously expected,” S&P said. “The outlook is negative, reflecting the possibility of a further downgrade if Nokia fails to stabilize revenues and margins and significantly cut its cash losses.”

Evidently Nokia’s ugly first-quarter loss and 30 percent drop in sales didn’t do much to reassure S&P that the company’s turnaround is a sure thing — even with its relatively well-received new smartphone, the Lumia.

“We still expect revenue from Lumia smartphones to grow over time but not sufficiently to offset a rapid decline in revenue from Symbian-based smartphones over the next few quarters,” S&P analysts said.

Another voice to add to what’s fast becoming a Greek chorus of Nokia doomsayers. The company has been slapped with three nasty credit downgrades in a row.

Earlier in the week, Fitch downgraded Nokia’s long-term credit rating to junk status; last week, Moody’s did the same thing, citing concerns about Nokia’s low-end phone business.

Nokia sold 83 million units, while Samsung sold 92 million phones, according to IHS iSuppli. That’s a reversal from last year’s fourth quarter, where Nokia shipped 113.5 million units, while Samsung shipped 97.6 million.

On the smartphone side, Apple retained its top spot, shipping 35 million iPhones, followed by Samsung, which sold 32 million smartphones.

“With cellphones now accounting for more than 40 percent of Samsung’s overall revenue, it’s clear that the company’s continued investments in smartphone hardware and software R&D are paying off,” IHS senior analyst Wayne Lam said in a statement.

“The company is not only cashing in on the market’s shift to smartphones, but is also succeeding in other cellphone product categories, allowing it to capture the overall market lead,” Lam said. “What makes Samsung’s performance even more impressive is that the company’s latest Galaxy S III handset has yet to be launched, with shipments set to start in May. This indicates Samsung is likely to make further progress in market share in 2012.”

Of the two, Jonathan Schwartz, Sun’s last CEO, spent the most time on the witness stand. Called by lawyers for Google, he bolstered Google’s argument that it was free to use parts of Java as it assembled its Android mobile operating system.

Scott McNealy, called by Oracle, said it was Sun’s practice to let other companies use Java, but only with a commercial license, the primary requirement of which was that the licensee ensure that Java remain compatible.

While numerous other phones from the likes of Nokia, Research In Motion and Motorola were compatible with Java applications, those on Android weren’t. Compatibility is one of the main points over which Oracle has been arguing with Google. Oracle contends that not only did Google violate its patents and copyrights, but it then went on to build its own incompatible version of Java, fracturing one of the oldest premises of Java’s existence: Write once, run anywhere.

Schwartz said he had hoped that Google would take out a commercial license, but in the end, he said, according to a report on CNet News, Sun opted “to grit our teeth” and support it as part of the Java community. He said that he opted not to sue Google over the issue.

Oracle also presented as evidence an email from Schwartz, describing Google as having taken Java “without attribution or contribution,” and then went on: “This is why I love scroogle,” referring to a now-defunct Web-search service that served up Google-like search results anonymously. See it below.

During Verizon’s first-quarter earnings call Thursday, CFO Fran Shammo voiced the carrier’s support for Microsoft’s mobile OS, saying it’s “hoping to do the same thing” with Windows Phone that it did with Android.

“It is important that there is a third ecosystem brought into the mix here,” Shammo said. “We are fully supportive of that with Microsoft. … We helped create the Android platform from the beginning and it is an incredible platform today, and we are looking to do the same thing with a third ecosystem.”

Which is interesting to hear, because that certainly doesn’t appear to have been Verizon’s intent to date. Currently, the carrier has only one Windows Phone in its portfolio — the HTC Trophy, and it’s an older model. So for Shammo to suddenly announce that it’s going to back Windows Phone the way it backed Android suggests Verizon has finally dispensed with the wait-and-see approach it had taken with the platform.

The question now: What Windows Phone devices will the carrier add to its portfolio? Shammo didn’t say, but there’s at least one easy guess: One of Nokia’s Lumia devices.

Nokia reported that quarterly sales were 7.4 billion euros, down from 10.4 billion euros a year ago. On the earnings side, the company lost 25 euro cents per share.

The company also announced on Thursday that top sales executive Colin Giles is leaving the company. His direct reports will now funnel to Niklas Savander, executive VP of markets.

Nokia had said last week that it would fall short of its goal of near-break-even results, and cautioned that things in the current quarter would only be about the same as they were in the disappointing first quarter.

“We are navigating through a significant company transition in an industry environment that continues to evolve and shift quickly,” CEO Stephen Elop said in a statement. “Over the last year we have made progress on our new strategy, but we have faced greater than expected competitive challenges.”

In particular, things have been rough at the low end of the market, where Android is gaining quickly on the kinds of feature phones that have historically made up much of Nokia’s profits. In both smartphones and lower-end devices, Nokia saw significant drops in both the number of phones being sold and in the average prices those phones were fetching.

“We have a clear sense of urgency to move our strategy forward even faster,” Elop said. “We have focused our efforts in the low-end of smartphones and feature phone asset to drive improved business results and conserve cash. We are confident in our strategy and focused on responding urgently in the short term and creating value for our shareholders in the long term.”

For the current quarter, Nokia said to expect its operating margins to be worse than the -3 percent it posted during the first quarter. Nokia still looks to reduce its operating expenses by $1 billion over the next fiscal year, as compared to 2010.

“Nokia plans to accelerate and substantially deepen Devices & Services cost savings, consistent with its strategic focus,” it added. “Nokia will share further details as quickly as possible.”

Nokia noted that it did receive $250 million in “platform support payments” from Microsoft during the quarter. Nokia said that while it also pays minimum software royalty commitments back to Microsoft, it expects over the life of the agreement for the payments from Redmond to exceed those it must pay to Microsoft.

Looks like the software glitch that plagued early versions of the handset — and prompted Nokia to offer replacement devices to consumers affected by it — hasn’t had much of an effect on inventory. The company says that far more consumers have opted to patch their Lumias with the software Nokia has provided than have swapped them for new ones at a local AT&T store.

In other words, if the cyan version of the Lumia 900 is out of stock at AT&T’s online store (as it currently is), it’s because it’s sold out for the time being, not because Nokia is scrambling to update and recertify returned handsets.

“The inventory situation is primarily a function of demand because we are seeing that most customers are opting to keep their units and simply update via Zune,” Nokia spokeswoman Karen Lachtanski told AllThingsD. “So the impact of customer swaps is insignificant. We are producing more devices to satisfy demand as quickly as possible.”

That’s a good sign, indeed. And further evidence that sales are exceeding expectations, as Paul Roth, AT&T’s president of retail sales and service, recently claimed.

Wearables have enormous potential for uses in health and fitness, navigation, social networking, commerce, and media. Imagine videogames that happen in real space. Or glasses that remind you of a colleague’s name that you really should know. Or paying for a coffee at Starbucks with your watch instead of your phone. Wearables will transform our lives in numerous ways, trivial and substantial, that we are just starting to imagine.

So what will it take to elevate these accessories from niche to mainstream? Hardware advances in battery life and the way sensors interact with each other will get us further than we are today, but the software platforms that drive the hardware hold the key to consumer adoption. In the same way that Windows took the PC mainstream and iOS and Android are powering the smartphone revolution today, wearables’ success depends on backing from one or more of the big five software platforms — Apple, Google, Microsoft, Amazon and Facebook. These platforms — and their developer communities — hold the key to the consumer connection. How so?

Apple has the most polished marketing, channel and brand. More than any other company, Apple has the potential to make any product go mainstream (witness the iPad). Apple’s expertise in hardware manufacturing, its developer network, its marketing prowess and its channel strength in Apple Stores and partner retailers all add up to a fertile petri dish for wearables. Already, Apple has inspired a number of “app-cessories” built to sync with iOS devices, like the Lark sleep sensor wristband and the (now discontinued) Jawbone UP fitness wristband.

Google has an open platform and a license to dabble. Google’s Android is the platform of choice for WIMM Labs, the Sony SmartWatch and others because it’s open: Product strategists can build whatever products they want on top of Google’s code while still taking advantage of the growing number of developers and companies that build Android apps. Additionally, Google has crucial elements of search infrastructure, with the ability to recognize and retrieve vast amounts of information like location-based data, which could be the basis for many wearable device features.

Microsoft has the best depth sensor yet. Windows Embedded, Microsoft’s operating systems and related solutions for “intelligent systems,” powers a wide range of products from Ford’s Sync automobile information system to Polycom conference phones. But to date, these solutions have been geared more for enterprise use, and haven’t attracted the same breadth of professional and amateur developers that iOS and Android platforms have — a crucial component for taking wearables mainstream. But another Microsoft product, the Kinect for Xbox 360, has captured developers’ imaginations, prompting a Kinect application programming interface for Windows. The potential of a Microsoft powered wearable becomes much more tangible when you imagine the depth sensor of the Kinect turned outward from your body, toward the world rather than toward you.

Amazon has information on more than 100 million products and their buyers. More and more consumers are starting their product searches with Amazon. Its all-encompassing product catalog, detailed product specs and reviews and personalized recommendations would all be assets in wearables. But despite Amazon’s success in manufacturing the Kindle line, we think it’s more likely that Amazon’s wearables strategy will center on distributing apps for other companies’ devices, rather than manufacturing the device itself.

Facebook has a Rolodex — and facial recognition — for 800 million people. Facebook, like Amazon, has the tool kit to be a partner player in the wearables market. Facebook is controversially implementing facial recognition software to autotag photos from its 800 million users — software that would be a perfect fit with a wearable device. Like that guy on the train? Sorry, he’s “in a relationship.”

In three years, we believe wearables will matter to every product strategist, just as mobile and tablets matter today. And because the software platforms are the key to mainstream, these devices have the power to intensify the platform wars among the big five — over issues like talent, intellectual property and patents, developers and customers. Wearables will shift toward mainstream in three phases:

• Phase one: Apple grows the app-cessory market with a deeper investment in wearables. For instance, by adding more sensors and connectivity to the iPod nano, as well as Siri voice control, Apple could immediately spark innovation in iOS apps and more accessories for nano beyond its existing watchbands.
• Phase two: Google broadens wearable experimentation with its open platform. Our call that Google will dominate in wearables — at least in the short term — may be surprising given our skepticism about Android’s prospects on tablets in the past. But an open platform for experimentation is exactly what wearables will need to evolve out of the early stages.
• Phase three: Microsoft competes with an “anti-platform” platform. With Windows 8, Microsoft is pivoting away from .NET/Silverlight to the open Web protocols of HTML5 and Javascript. This shift will be a strength for Microsoft to build on, promoting a future OS for wearables as a more flexible, scalable platform for developers than iOS or Android.

Sarah Rotman Epps is a Senior Analyst serving consumer product strategy professionals at Forrester Research. Follow her on Twitter @srepps. To learn more about this research, visit the full wearables research report here.

The credit firm cut long-term and short-term debt ratings by one notch. Moody’s also said its outlook was negative, meaning further downgrades are possible.

“While volatility by quarters is not uncommon, Moody’s believes that the structural challenges facing Nokia’s Mobile Phones segment may not be easy to address, such as the market share gains recorded by makers of very low-end phones or new phone promotions by Chinese carriers,” Moody’s said in a statement. “This precipitous decline is of particular concern considering that Nokia’s Mobile Phones segment was still the core income generator for the Nokia group in 2011, when it contributed 1.5 billion Euros to the group’s operating profit of 1.8 billion Euros.”

Moody’s also noted that the company’s shift from Symbian to Windows Phone-based devices “is proving more challenging than expected given that sales of Symbian-based devices are falling off very quickly while Lumia sales are only ramping up slowly.”

The ratings move follows Nokia’s warning last week that its business was weaker than expected and that it sees another rough quarter ahead. Nokia is slated to deliver its full earnings report on Thursday.

For its part, Nokia said it is “quickly taking action” to address concerns about its business.

“Nokia will continue to increase its focus on lowering the company’s cost structure, improving cash flow and maintaining a strong financial position,” CFO Timo Ihamuotil said in a statement.

Nokia was hit with downgrades last year after announcing its plans to focus on Windows Phone.

Moody’s did note that Nokia “has maintained a strong liquidity position and capital structure” and had about twice as much cash and marketable securities as it did debt as of the end of March.

Indeed, it appears that the device is selling so well that it’s tough to even find one right now. AT&T’s online store lists both versions of the device — cyan and black — as temporarily out of stock. At Amazon Wireless, the cyan version is back-ordered. And four of the five AT&T stores I called told me they had run out of stock.

Which is good news and bad for the Nokia, AT&T and Microsoft triumvirate — if the stock-outs are demand-related.

Good news in that the Lumia 900, the most eagerly anticipated Windows Phone device to date, is off to a good start, despite an unfortunate software glitch that prevented Internet access for some early customers. Bad news in that Nokia and AT&T don’t seem to have a supply sufficient enough to put a 900 in the hands of everyone who would like one.

There are a few caveats to this, however. It’s possible that these stock-outs may not be demand-related. They could, for example, be caused by Nokia’s offer of replacement handsets to consumers whose Lumia 900s were affected by that software glitch I mentioned earlier. While it’s likely that most of those consumers opted for a downloadable fix for the issue, it’s also conceivable that a number of them might have swapped their devices for new ones at a local AT&T store. And that clearly would have an effect on inventory.

Another possible reason for these inventory issues: AT&T’s Lumia 900 stock might have been depleted if it returned handsets potentially affected by the software glitch to Nokia for updating and recertification. Though I have no insight into it, I imagine that process would take some time. And it would likely have inventory implications for AT&T’s online store, and its local outlets as well.

AT&T and Nokia both declined comment on the issue.

The Finnish phone maker reiterated that customers can either download and install the patch or exchange their phone at an AT&T store. Nokia had originally said to expect the software update to be ready by Monday.

“Consumers now have the opportunity to update their AT&T version Nokia Lumia 900 software through Zune and Windows Phone 7 Connector for Mac earlier than anticipated,” Nokia said in a statement.

All Lumia 900 customers, regardless of whether they have had problems, will get a $100 credit, Nokia U.S. head Chris Weber told AllThingsD earlier this week. Customers that buy or order a Lumia 900 before midnight PT on April 21 will also get the credit.

That effectively makes the device free, for now, since AT&T had been selling it for $99 with a new two-year contract.

Nokia has gotten plaudits for its prompt and generous dealing with the issues. However, the glitches still threaten to diminish the launch of a product seen as key to the ambitions of Nokia and Microsoft to take on the top smartphones and re-establish themselves as serious players in the U.S. market.

The issue was particularly unfortunate given the teaser campaign that Nokia had run, touting that the arrival of the Lumia 900 meant that “the Smartphone Beta Test was over.”

Today’s warning — Nokia’s second in less than a year — shows the near-Sisyphean task the company has before it as it works to muscle its way back into the smartphone market. And as much as CEO Stephen Elop says Nokia’s leadership is doing its damnedest to “increase the clock speed of the company,” recovery is still a long way off.

“We see a continued risk that Q2 proves weaker than even the new guidance implies,” Nomura Equity Research’s Stuart Jeffrey wrote in a note to clients this morning. “Moreover, unless new feature phone models are an instant hit, there is a risk that Q3 will see another leg down in earnings.”

With its shares at this level, Nokia’s market capitalization has fallen to $16.25 billion. That’s getting close — if you consider within $2 billion to be close — to the level of Nokia’s cash position, which as of Dec. 31 was $14.2 billion. That would, in theory, make it an easy acquisition target for a cash-rich suitor like, say, Microsoft, which as of Dec. 31 had nearly $52 billion in combined cash and short-term investments. If the share price keeps falling, an acquirer like Microsoft could take out Nokia almost for free, or for a small premium, assuming that Nokia can, in its current state, demand one.

The company said it expected negative margins of 2 to 3 percent for its devices and services business, as compared to its earlier expectation of roughly break-even results.

“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,” CEO Stephen Elop said in a statement.

Nokia cautioned that it will take “tactical price actions” in its low-end phone business, and also warned that further painful moves could be on the horizon.

The Finnish company said it “will accelerate planned cost reductions and will pursue additional significant structural actions if and when necessary.”

“We are continuing to increase the clock speed of the company,” Elop said. “The change is tangible, and we are proud of the way Nokia employees are quickly responding to the needs of consumers and partners.”

Elop tried to paint as good a picture as possible of things.

“Within our Smart Devices business unit, we have established early momentum with Lumia, and we are increasing our investments in Lumia to achieve market success,” Elop said. “Our operator and distributor partners are providing solid support for Windows Phone as a third ecosystem, as evidenced most recently by the launch of the Lumia 900 by AT&T in the United States.”

Of course, even there, things have been bumpy. Nokia confirmed late Tuesday that a software glitch is causing some Lumia 900 customers to be unable to connect to the Internet. The company is rushing out a software fix and offering a $100 credit to all early Lumia 900 buyers.

Nokia said that it sold more than two million of its Lumia phones in the first quarter, at an average selling price of 220 euros. It added that the number of Lumia phones being activated has continued to grow each month, although that’s probably to be expected as the company brings its Windows Phone products to more markets.

So far, the launch hasn’t gone quite so well. First there was a lackluster review. Then, days after going on sale on Easter Sunday, the company has admitted to a software glitch and is offering people who bought one a $100 credit in addition to a software patch. The credit makes the phone free to buyers willing to take a two-year service contract.

Now the market research firm IHS iSuppli has taken a Lumia 900 apart and, in a report shared with AllThingsD that will be released later today, has determined that it costs Nokia about $209 to build. And, judging from the parts being used, it’s not exactly built like the most cutting-edge phone on the market.

In fact, it seems like Microsoft and wireless chipmaker Qualcomm are both making an effort to showcase how efficient Windows Phone 7 for mobile can be; at the same time, they seem to be aiming to entice other hardware manufacturers by demonstrating that a full-featured smartphone can be built using components that are about a generation behind the current high end, and therefore cheaper, says Andrew Rassweiler, the iSuppli analyst who supervised the teardown.

For example, the teardown found that the Lumia 900 uses a single-core Qualcomm chip that costs $17 as its main applications processor; a phone with similar features running Google’s Android OS, such as Samsung’s Galaxy SII Skyrocket, uses a higher-end dual-core processor that costs $22.

“It appears what Microsoft and Qualcomm and Nokia are trying to do here — and this is being driven by Microsoft more than anyone else — is streamline the OS so it can run on a lighter processing platform,” Rassweiler told me. “The point being is to undercut the higher end phones.”

The choices don’t end with the processor. The phone contains only 512 megabytes of DRAM memory, where most phones would use one gigabyte. And the trend is expected to continue, as the next generation of Microsoft’s mobile OS will require even less memory.

Another example: The Bluetooth chip. Nokia is using a slightly older chip from Broadcom, and not the latest, greatest Bluetooth part. The difference between them is only $2.50, but it serves as another example showing that Nokia is aiming to compete on price.

For Nokia, the strategy seems to be one of aiming to compete against other phones on price, while offering similar features. The Lumia is thought to sell for $450 at retail without a subsidy, or about $200 lower than Apple’s iPhone 4S, which starts at $649 without a contract, depending on model, and costs between $188 and $245 to build.

Microsoft is also thought to be helping Nokia out, says iSuppli’s Wayne Lam, who also participated in the teardown analysis. While software costs are not considered in a teardown analysis, he says Microsoft is thought to be making less than $5 per phone in licensing fees on the Windows Phone 7 operating system, far lower than the $15 per device it is said to want. That would be in line with the $3 per phone price that Nokia is thought to have paid in licensing fees for the Symbian OS it used previously, and of which it was a partial owner. “Nokia is getting a fantastic discount,” Lam told me.

One place where Nokia didn’t skimp? The gyroscope chip, which determines how the phone is being moved. It contains the same gyroscope chip from STMicroelectronics that goes into the iPhone 4S. There are, apparently, some things on which you simply can’t compromise.

Nokia U.S. chief Chris Weber told AllThingsD that the problem is a memory-management issue with the phone’s software, and is not tied to any hardware issues or to a flaw with AT&T’s network. The connection problem affects only a limited number of customers, Weber said.

Nokia has created a software fix, and all customers can swap their device at an AT&T store for an updated one or download a software update starting around April 16.

“We’re already manufacturing devices with the new software,” Weber said. “Those are being shipped to AT&T stores.”

The company is offering a $100 credit to all customers, regardless of whether they are encountering the problem. The $100 credit is also being offered to any customer who purchases a Lumia 900 before midnight PT April 21, effectively making the device free.

“The customer always comes first, and I think we’re showing it here,” Weber said in an interview.

Weber said the cost of the program depends on how many people purchase Lumia devices through April 21, and said that the expense was not the issue.

Nokia, he said, was focused on “how do we do something unprecedented for any inconvenience, (and) pleasantly surprise the customers.”

Nonetheless, the issue is clearly not the way the company hoped to launch what is designed to be a flagship product aimed at reestablishing the company as a major smartphone presence in the U.S.

“Obviously you don’t want these things to happen,” Weber said.

AllThingsD’s Walt Mossberg noted in his review that he experienced some other issues with the 900, including problems loading Internet Explorer pages over Wi-Fi.

Weber hopes the company will be remembered more for how it handled the problem than for the issues themselves. And, he said, visits to six Chicago-area stores on Monday affirmed for him that enthusiasm for the Lumia 900 is strong.

“We’re seeing incredible customer excitement and buzz,” Weber said. “I think we have a very compelling device that customers are excited about.”

Nokia, Microsoft and AT&T are all counting on big sales for the device and have said they are putting unprecedented marketing behind its launch.

Oddly, though, the product went on sale on Easter Sunday, a day when most of the Microsoft and AT&T stores that carry the device were closed.

As for how such a significant issue could have made it through the company’s testing processes, Weber said, “That’s something we are doing a current investigation on.”

It’s particularly unfortunate given that one of Nokia’s marketing pitches for the Lumia 900 was an online and TV ad campaign saying that the Smartphone Beta Test was over, and encouraging existing smartphone owners to trade in their “beta” Androids and iPhones for a real smartphone.

As flagship product launches go, the Lumia 900’s was more unusual than most. Certainly, the decision to launch the handset on Easter Sunday was perplexing. But more confounding still was the manner in which it was carried out, which really doesn’t speak well of Nokia or its carrier partner AT&T, which in late March was hyping the Lumia 900′s launch as its biggest ever — and that includes the iPhone’s debut.

“At all levels, this is a notch above anything we’ve ever done,” AT&T device head Jeff Bradley said at the time. “Before you walk in to the store, you know this is our hero phone.”

Sounded great in theory. But what did it mean in practice?

Well, in practice it meant that consumers missed out on that hero-phone messaging, because there weren’t too many AT&T stores for them to walk into. Most were closed for the holiday, a detail revealed on an outgoing voicemail message that included no mention whatsoever of the Lumia, but a nice little plug for one of its main rivals:

“Visit our store to see the exciting iPhone 4S, and how only AT&T’s network lets your iPhone 4S download three times faster.”

An unfortunate oversight. And I was far from the only person to notice. Barclays analyst Raimo Lenschow picked up on it as well, along with a few other details suggesting Nokia and AT&T’s execution left a lot to be desired.

“Our admittedly anecdotal check of 10-15 stores did not find a single one that was open — a significant barrier to sales,” Lenschow said. “We found promotional materials for the Lumia — banners, display cases, etc. — unevenly prepared during our window shopping. The promotional messages on the answering services for the stores was in fact for the iPhone.”

More disturbing still was the lack of coordination Lenschow found at AT&T’s national sales office. “Several of the national representatives were unaware of the launch,” the analyst said. “Several were in fact unaware of the device itself.”

And then there was that Nokia-sponsored Nicki Minaj concert in Times Square. That seems to have gone over well (see video embed below), but more for Minaj than Nokia. Can’t imagine that stunt sold many Lumia 900s.

So, as I said, a perplexing and at times poorly orchestrated launch. Though it doesn’t seem to have had any ill effect on sales. The Lumia 900 has already risen to the top of Amazon’s Best Sellers list for Cell Phones With Service Plans, and AT&T seems quite happy with sales so far.

“The Lumia has gotten great reviews and we have been taking preorders online and in our stores for a week,” AT&T spokesman Mark Siegel told AllThingsD. “We are well off to the races.”

(Image courtesy of Flickr/NokiaOfficial)

Other times, products experience moderate or even sluggish first-day sales.

Rarely, though, does a product hit the market on a day when stores are largely closed.

That, however, was the case for the Nokia Lumia 900, which launched on Easter Sunday.

As a result, many of the AT&T and Microsoft stores that carry the device were actually shuttered for the first official day of sales. The product did indeed go on sale on Sunday, though — at least at those stores that were open.

No real reason was given for the unusual timing. One side benefit, though, is that little can be made of the initial sales, giving the device some time to live up to the high expectations placed on it by AT&T, Microsoft and Nokia.

The product is especially key for Microsoft and Nokia, both of which have pegged their rebirth in the smartphone market to the success of the new Lumia. The companies are investing heavily in marketing the product, along with getting it to market at an attractive price.

The phone, which aims to compete in the high end of the market, is priced at $99 with a new contract, and can be had for even less from some online sellers.