Nokia's Q2: all lemons, little lemonade

Summary:The Finnish mobile giant's billion-dollar loss in the second quarter shows a company reeling from years of poor strategy as it grasps desperately for a chance at a second act.

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Nokia's corporate color is blue, but when I look at its second quarter earnings , all I see is red, red, red.

A net loss of $1.74 billion. Sales down by 26 percent year over year. Smartphones sales down 34 percent in the same period. And despite promises to shed non-core assets and unused facilities, cash on hand is down by $730 million. (You can read the rest here .)

When it rains, it pours.

You've got to feel for chief executive Stephen Elop, who in many ways has been tasked with turning an aircraft carrier as fast as a slot car. When I look at the numbers, I see a company finally feeling the extent of the pain derived from years of poor strategic decisions. Now there's even more pain as it attempts to lighten the load, turn a corner and get back in the running.

But there's room for worry: like BlackBerry-maker Research in Motion, there is simply not enough money coming in. Margins have thinned. Highlights are few and far between. The only bright spot, truly, is the fact that Nokia's North American sales and services are up 45 percent year over year -- but at the expense of huge declines on every other continent. (And when you consider that Nokia's been a non-player in the U.S. since the dawn of the age of the smartphone, you wonder just how bright that spot really is.)

When you look at device volumes, the picture doesn't get much better. If it was Nokia's plan to sell its flagship Lumia device cheap enough to undercut the iPhone or top-flight Android devices, it's not working -- every continent save one on which the company operates showed fewer Nokia devices moving through the channel, including smartphone-happy North America.

If you're taking on a corporate transition, this is not how it's supposed to go. Investing in the future means taking a loss with the hope of future gains. But Nokia, across virtually its entire enterprise, is still reeling from assaults on every line of business. The aircraft carrier is still afloat, but nary an engine is driving it. (The company's top highlight for the quarter: development on a new factory to serve the feature phone market in Vietnam.)

Elop and company are working to downsize the company into fighting shape -- some 10,000 positions will be eliminated by 2013 -- but the question is whether they have the bandwidth to simultaneously develop new streams of revenue to push the company forward and fuel its next act. Sales of the Microsoft Windows Phone-powered Lumia smartphone were up, to 4 million for the quarter, but those figures aren't nearly enough to be the company's saving grace. Cuts and reductions will only get you into the shape you needed to be five years prior.

Nokia says that "Q3 will remain difficult," hardly a surprise given the magnitude of the company's problems. The question is whether it's too far behind to ever catch up.

Topics: Mobile OS

About

Andrew Nusca is a former writer-editor for ZDNet and contributor to CNET. He is also the former editor of SmartPlanet, ZDNet's sister site about innovation. He writes about business, technology and design now but used to cover finance, fashion and culture. He was an intern at Money, Men's Vogue, Popular Mechanics and the New York Daily Ne... Full Bio

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