A flat start for Nokia's life without handsets - but coffers buoyed by Microsoft nonetheless

A flat start for Nokia's life without handsets - but coffers buoyed by Microsoft nonetheless

Summary: The first set of results since selling its devices and services business to Microsoft show new CEO Rajeev Suri is keeping things on a very even keel.

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TOPICS: Networking, Nokia
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Nokia has turned its first set of results since selling its handset business to Microsoft and, while they're largely flat, Microsoft figures heavily in both Nokia's past and present.

According to its second quarter results released on Thursday, Nokia generated revenue of €2.94bn, down around seven percent on the €3.16bn for the same quarter last year. The company made €284m of operating profit over the second quarter, a noticeable jump on a year ago, when the bottom line showed a €12m profit. The figures exclude the now-sold handset business, and purely cover Nokia's ongoing businesses.

If currency fluctuations were ironed out, the drop in revenue would have been more like two percent, Nokia added, and with the proceeds from the Microsoft sale added to its bottom line, the quarter showed a healthy profit of €2.51bn overall.

Nokia Networks, the largest of the three businesses that form Nokia after the sale of its devices unit, showed revenue falling eight percent year on year to €2.6bn, and operating profit down 14 percent to €281m.

The drop came as a result of lower sales by its Global Services business, as well as selling off of businesses "not consistent with its strategic focus" and pulling out of  particular contracts and countries. 

The company remains upbeat about the unit's prospects for the rest of the year however, saying its expects sales to rise in the second half, citing factors including an increase in new network rollout projects, particularly around TD-LTE in China, and better operational efficiency at the company.

Year on year, Nokia's mapping business Here held steady on revenue, turning in €232m, just €1m less than last year, though profit fell by €8m to break even for the unit. 

Quarter on quarter, Here's revenue was up around 10 percent, which Nokia said "was primarily due to Microsoft becoming a more significant intellectual property licensee in conjunction with the sale of substantially all of the Devices & Services business to Microsoft". The increase from Microsoft helped to counter lower sales to sat-nav providers and a drop in revenue related to smartphones sales from the old Nokia handset business. However, sales to vehicle makers are on the up, it said: it sold 3.3 million licences to car companies, compared to 2.7 million a quarter ago.

Nokia Technologies, its R&D and IP business, was the only unit to increase both revenue and operating profit: the former rose €2m year on year to €147m, and profit was up by €6m to €96m. Again, Nokia has Microsoft to thank here: it said the jump is down to Microsoft becoming a "more significant intellectual property licensee", though new deals with other licensees also helped. 

Nokia is predicting the unit will bring in €600m over the year, in line with previous predictions.

Over the quarter, Nokia also saw its a cash injection of €4.8bn thanks to the sale of the devices and services business to Microsoft, which closed in late April.

While Nokia did not disclose how many devices it sold between the start of the quarter and the deal closing, it reported revenue of €497m, an operating loss of around €116m for the period. Over the remainder of the quarter, Microsoft sold 5.8 million Lumia devices and around 30.3 million feature phones.

Shortly after the sale, Nokia appointed Rajeev Suri, then head of its networks business, as CEO. It also made a number of acquisitions over the period, including Mesaplexx, Medio, and SAC Wireless.

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Topics: Networking, Nokia

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  • It will be interesting to see ...

    if Nokia, now independent of Microsoft, can recapture some of their innovation magic. I think it may be touch as they probably have alienated a lot of former workers (engineers, developers, etc..) in their homeland. However, I think a spin-off startup business (made of previous workers), possibly employee owned so they can make their own decisions and not be governed by a board of directors which employees might not be inclined to trust, might be able to innovate and think outside the box. Hard to say, but as a former Nokia handset owner for quite a few years, I would like to see them try if they have the inclination.
    jkohut
    • Already happened

      See http://en.wikipedia.org/wiki/Jolla

      for the first such spin-off.
      jessepollard
    • Nokia has always been independent from MS

      too many people make the mistake of assuming that since MS partnered with Nokia on handsets only, their networking, Here and other divisions where not involved with MS in any real way.

      In fact, with Networking they partnered with Siemens, and Nokia had bought portion of Motorola, as well as other things, but they were floundering a bit at those, all unrelated to MS dealing with them on Smartphones.
      William.Farrel
      • As independent as any of its other partners

        Which means if the CEO of MS says "jump", the CEO of the client firm says "how high?".
        John L. Ries
        • Which is it?

          "MS is in decline"
          "MS has failed in mobile"
          "The emperor has no clothes"

          Or

          "MS says jump"
          "MS dictates action"
          "MS unfairly controls the market"

          Odd how the assertions seem to flip to support the conclusion de jour
          Nierteroth9
          • MS still has a great deal of influence

            I have no doubt whatever that MS dictates to its partners to the maximum extent allowed by law (do you really think that "Dell recommends" the latest and greatest Windows no matter what it is for technical reasons?). It's developers and users that it has trouble dictating to any more.
            John L. Ries
          • Elaboration...

            ...I think MS' waning influence over developers and users is a large part of the rationale for making Metro a walled garden and casting it as the future of Windows.

            If MS has a monopoly over the distribution of Windows apps, then developers have a lot more incentive to toe the line.
            John L. Ries
          • For those that support non-MS companies or products

            it's the norm.

            "MS's mistake is that they turned left while everyone else was turning right".

            "Really? look like they made a billion turning left".

            "See! MS tricked the others into turning right! They should be sued".

            And so it goes on.....
            William.Farrel
          • I'm not sure how that relates to my posts

            Those who support non-MS systems aren't normally under any pressure to support only one brand, or to not support Windows.
            John L. Ries
  • Flat and profitable isn't so bad

    Flat and unprofitable is what is would be a problem.

    And if it can stay that profitable, it will buy Nokia some breathing room to develop new products (real products, not "enforcement actions").
    John L. Ries