Nokia reports US$1.76bn loss

Summary:Nokia reported a quarterly loss of US$1.76 billion as company CEO Stephen Elop revealed that the company's flagship Lumia handset had launched to "encouraging awards and popular acclaim" — but that "actual sales results have been mixed".

Nokia reported a quarterly loss of US$1.76 billion as company CEO Stephen Elop revealed that the company's flagship Lumia handset had launched to "encouraging awards and popular acclaim" — but that "actual sales results have been mixed".

Stephen Elop

Stephen Elop shows off the Lumia 900 at CES 2012.
(Credit: Lori Grunin/CNET)

Elop made the comments in Nokia's earnings statement. Nokia reported first-quarter results in line with its profit warning.

The Lumia launch is critical to Nokia, given that it's under fire in emerging markets and at the low end of the phone spectrum. Here's Elop's assessment:

We have launched four Lumia devices ahead of schedule to encouraging awards and popular acclaim. The actual sales results have been mixed. We exceeded expectations in markets, including the United States, but establishing momentum in certain markets including the UK has been more challenging.

Meanwhile, Elop said that Nokia has to battle on the feature-phone end of the spectrum. Nokia will renew its Series 40 platform, fill product gaps and largely compete on price.

The crunch on the high end and low end of the device market could be deadly for Nokia. On one hand, Elop said it will ramp-up Lumia advertising and new features with "a clear sense of urgency". On the other side of the equation, Elop noted that it will be aggressive on the low end of the market, while conserving cash.

Conserving cash may become a bigger concern. Nokia's cash position in the first quarter fell 24 per cent from a year ago, and sales in the first quarter were hammered across the board. This table highlights all you need to know about Nokia’s standing; it's Lumia or bust.

Nokia results

(Credit: Nokia)

Analysts were mixed on the news. Among the positives:

  • Nokia is streamlining; Nokia has removed layers of sales manager and intends to improve customer focus. The catch? Colin Giles, executive vice president of sales, is stepping down, but Wedbush analyst Scott Sutherland says more execs need to go. However, Nokia wants new sales blood

  • The Lumia launch went well in the US. Sure, Nokia said Lumia sales were mixed in the first quarter, but the US, an emerging market for Nokia, looks decent, said analysts

  • Nokia acknowledges its issues. The company said it will continue to cut costs, and has been transparent. Transparency, however, doesn't book revenue. Wall Street appears to appreciate the effort, at least.

The negatives:

  • Nokia doesn't have much of a lower-end phone plan. The company said it would reinvigorate its low-end phones, but it has to compete with an Android army. Feature phones are now touch, and blending into smartphones. Good luck, Nokia. Jefferies analyst Lee Simpson said in a research note:

    The portfolio focus will likely be on series 40 (7 new Asha devices) in 2Q12. Here (lower price tiers), Nokia is subject to considerable pricing pressure from rivals with better or improving cost controls and full touch UI.

    This means that Samsung, Huawei and ZTE are expected to eat Nokia's lunch

  • Windows Phone staying-power questions. Simpson said that potential Lumia 900 buyers may be turned off by upgrade capability — Microsoft Windows Phone 7.5 devices can't be upgraded, and that may spook customers. Meanwhile, there are Android and iPhone 5 roll-outs on deck

  • China is tough. A lot of Nokia's issues are in China. It's unclear whether Nokia can compete with home-grown handset makers on price.

Via ZDNet US

Topics: Android, Google, Mobility, Nokia

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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