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Topic: Enterprise Software

Nokia issues Q1 profit warning, moves 2 million Lumia units

Summary: Nokia shipped 2 million Lumia units in the first quarter, but the company was thumped by weak emerging market demand.

Larry Dignan

By for Between the Lines |

Nokia said that its first quarter results for its mobile phone and smart device unit will fall short of expectations largely due to weakness in emerging markets.

The company said in a statement that the Lumia launch has had a positive start, but it wasn't enough to save the quarter.

Nokia said that "competitive industry dynamics" in emerging markets such as India, China, Africa and the Middle East led to a shortfall. As a result, gross margins will be weak.

The company did say that it sold 2 million Lumia devices. CEO Stephen Elop noted:

Our disappointing devices and services first quarter 2012 financial results and outlook for the second quarter 2012 illustrates that our business continues to be in the midst of transition. 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.

The Nokia profit warning comes just as investors were becoming upbeat about the Lumia launch. Nokia brought the Lumia 900 to the U.S. with a good amount of buzz. Nokia also launched the Lumia in China.

Also: Nokia's Lumia 900 launch: Can it crank up the unit volume?

Shares were hammered in premarket trading with Nokia falling 17 percent.

On a conference call, Elop said he would refrain from preannouncing products, but was upbeat about Windows Phone.

In the past we said we are increasing investment in mobile space. The fruit of that work will become clear in the quarters ahead.

Elop added that the company was in "build mode" with Lumia, but the lower end of the market is giving Nokia trouble. Nokia has to cut prices on dumb and feature phones to compete. By the numbers:

  • Nokia said that its devices and services net sales for the first quarter will be Euro 4.2 billion. Mobile phone sales will be Euro 2.3 billion with 71 million units. Smart device sales will be Euro 1.7 billion with 12 million units.
  • Inventory in the first quarter was high relative to Nokia's 4 to 6 week range in the channel.
  • First quarter operating margins will be negative 3 percent or so. Nokia had projected break even give or take two percent in either direction
  • The second quarter operating margin will mirror the first quarter. Nokia expects tough competition to continue in emerging markets as well as a weak economy in Europe. In addition, new product launches haven't kicked in fully.

Related:

Topics: Enterprise Software, Banking, Nokia

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32 comments
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  • Nokia issues Q1 profit warning, moves 2 million Lumia units

    This was to be expected while they transition away from Symbian and into Windows Phone. Now that the Lumia has been released in the U.S. they can start picking up on their financials. That 17% drop on their stock is good news, people should start buying now while its cheap.
    Loverock Davidson-
    Reply Vote

    • The Expectation That Expectations Were Not Met Was Met

      Perhaps I'm cherry-picking, but negative 3 percent or so margin when break-even plus or minus two percent had been projected?

      Sir, with regards to the spin, you should have quit while you were behind.
      DannyO_0x98
      Reply Vote

    • hahahah

      "Now that the Lumia has been released in the U.S."

      I don't think selling a few dozen faulty handsets and then Handing out $100 bills with them will save them from this...........

      Google activates in 2 days than WP7 sells in a quarter..........go figure............

      WP7 sales are starting to make the Kin look impressive.............

      I see Android has 80% of the China market, the green robot of joy is unstoppable !!!!!!!!!!!!
      DejaVu2
      Reply Vote

      • The only revenue MS gets from mobile is from Android

        but Nokia decided to team with the losing team, thanks to Elop
        theo_durcan
        Reply Vote

    • o rly

      You seem to forget a flaw in your analysis

      Android has kicked Microsoft and Nokia to the kerb......................
      DejaVu2
      Reply Vote

  • On top of that a bug

    They will pay 100 USD to Lumia owners due to a software bug. Ouch!
    kirovs@...
    Reply Vote

    • HAHAHA

      The more negative rating, the better I know I have hit where it hurts. Thanks!
      kirovs@...
      Reply Vote

  • Is 2 million a quarter good?

    By my math that means roughly 8 million in a year right? So are these good numbers for a mobile device? I guess it depends on profit generated on each and every sale of said devices especially if one is NOT going to win the volume race. Still I have trouble figuring out even if one wins the volume race how that is a good thing. Volume does not in and of itself translate into profit.

    Pagan jim
    James Quinn
    Reply Vote

    • I think

      they are counting all Lumina sales....the 800 in the EU and the 700 or whatever in the US/EU. I doubt its the 900 yet. Since the Lumina went on sale in 2011 in the EU....its not that impressive really.
      JeveSobs
      Reply Vote

      • "Lumina went on sale in 2011 in the EU"

        Late 2011, November to be a little more precise. In other words these totals are for a touch over 1 and a 1/2 quarters.
        FrederickLeeson
        Reply Vote

    • Their Smartphone Volume

      They sold 12 million smartphones and 59 million non-smart phones in the quarter. Their explanation of their results suggest that the fall-off of demand in emerging markets for feature phones was the driver of the negative news. I understand this as meaning that they are behind the curve as the market transforms. But, we all knew this, and we all should have known that it would take Nokia a while to realign their products to the profitable demand sectors.

      Until they achieve that realignment, results are going to look weak. After? Well they're betting first look Windows Phone access will lead to healthy results, which will validate Elop's decision to outsource os and interface innovation and implementation.
      DannyO_0x98
      Reply Vote

  • Deleted

    .
    Loverock Davidson-
    Reply Vote

  • They're doing the only thing they can do...

    Even though they're taking a loss on the Lumias, their goal is to get the phones in consumers' hands. To own a Windows Phone is to love a Windows Phone. Nokia, Microsoft & AT&T are trying to build buzz & momentum for the brand. They need people to see other people using their phones. They need great word-of-mouth. And they need repeat customers (down the road).

    I think we'll have a much better picture by the end of 2013. By then, the Lumias will have had a full year to mature & Windows Phone 8 will have been out for a year... so we'll know whether Windows Phone is catching on or not.
    metromalenyc
    Reply Vote

    • No shortages

      [ul][i]I think we'll have a much better picture by the end of 2013. By then, the Lumias will have had a full year to mature & Windows Phone 8 will have been out for a year... so we'll know whether Windows Phone is catching on or not. [/i][/ul]Nonsense. There are always new excuses to make up! Windows Phone has already been out for a lot longer than a year. Do you hear any lack of excuses for why it's losing market share? Any shortage of reasons we have to wait before concluding it's a dud? Of course not. It's always something: Wait for Tango! Wait for Mango! Wait for Durango! Wait for Nokia! Just you wait, for Windows Eight! When the previous excuses wore out, they just made up new ones. When this current crop of "just you wait!" items fails to produce any improvement, there will be more "Just you wait!" items. Windows Phone is the OS of the future! And it always will be!
      Robert Hahn
      Reply Vote

      • It is puzzling

        I have to say that I also do not understand why Windows Phone has such a hard time. Maybe we are looking at it wrong. Consumer electronics is not driven by features. It is closer to entertainment where "cool" and "buzz" drives sales. Maybe changing the name of the phone would help? I guess we will have to wait and see how Lumias do in the marketplace.
        paul2011
        Reply Vote

        • It's clear Windows is a bad name for most consumers

          Consumers know that a windows phone is a turkey. Always been like that. So why some delusional fan-boys expect us to wait for the next durango, when finally things supposedly will turn and failure after failure after failure will turn on success, all of this thanks to fairy dust emanating from the kernel?
          theo_durcan
          Reply Vote

    • Nokia is kinda' like the Bad News Bears:

      It's always, 'Wait 'till next year...'.

      Windows Phones have had about 1 1/2 years so far on the market, and they haven't been able to move past the very low single digits in share.
      Theseus
      Reply Vote

      • Well, it doesn't help that Verizon is all about Android

        Sadly, Verizon, the largest cell carrier in the country, is heavily invested in Android to where they don't push anything else to the same level.

        One model in 12 months, and a mid-range unit at that.
        William Farrel
        Reply Vote

        • Happily for Microsoft Verizon is selling Android,

          at least the legal division is bringing revenues from Android!
          theo_durcan
          Reply Vote

  • This isn't

    Windows OS or Office where you have slim to no other options, were talking about smartphones here. MS is just simply to late to the game. They hyped the crap out of it and yet only sold 2 million worldwide. MS fan boys are in denial...now they are trying to shove that phone OS crap down on to desktop users...they really need a change in leadership!
    ewell44
    Reply Vote
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