Nokia has seen a 40-percent drop in device sales in the first quarter, as its Windows-based Lumia phones struggled to get a foothold in the UK and other markets.
Nokia has reported its first-quarter earnings, revealing that its flagship range of Lumia smartphones is failing to make a splash in the UK and other countries. Image credit: Ken German/CNET News
In its first-quarter earnings on Thursday, the Finnish handset maker reported it lost €1.34bn (£1.1bn) in the first three months of 2012 due to "greater than expected competitive challenges and seasonality". Across all of its units, which include Nokia Siemens Networks and its location and commerce business, sales fell 29 percent in comparison with 2011.
"We are navigating through a significant company transition in an industry environment that continues to evolve and shift quickly. Over the last year, we have made progress on our new strategy, but we have faced greater than expected competitive challenges," Stephen Elop, chief executive of Nokia, said in a statement.
Clearly, the adoption of Windows Phone as the primary OS has not yet paid off as Nokia hoped.– Malik Saadi, analyst
Despite a generally positive reception to its Lumia devices, customer goodwill was not necessarily reflected in the sales figures, and sales had not met expectations in some countries, Elop added. He specifically noted that the range had struggled to make an impact on the UK market since Nokia switched to the Windows Phone platform for its smartphones.
"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," Elop said.
Shift to Windows Phone
In the first quarter, Nokia sold around 12 million smartphones, of which around two million were Lumias. That represents a roughly 50-percent decline from the previous year. That lacklustre uptake led Malik Saadi, a principal analyst at Informa Telecoms and Media, to question whether Nokia's switch to Windows Phone will ever prove sound.
"Clearly, the adoption of Windows Phone as the primary OS has not yet paid off as Nokia hoped, and it remains to be seen if Lumia devices will shine in the future. Sales of Lumia devices in Europe and other parts of the world continue to be below our expectations," Saadi said in a statement.
"The current high-end Lumia devices are still no match for the iPhone and Samsung's top-end Android smartphones, and mobile operators are finding it much easier to sell devices on Android or iOS platforms," he added.
Saadi contends that educating channel retail staff to the benefits of Nokia and Windows Phone remains the company's biggest challenge. However, he suggested that Nokia may be waiting for Windows 8 to launch before it fully commits significant cash to pushing Windows Phone.
"Nokia will definitely have to increase its marketing budget and help operators to educate their sales force to sell the Lumia devices. It desperately needs Microsoft to help with a massive marketing push to get the platform moving and compete effectively — unless it's waiting for Windows 8," he said.
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