Nokia Q1 preview: 'Make or break quarter' on Windows Phone sales

Nokia Q1 preview: 'Make or break quarter' on Windows Phone sales

Summary: The ailing phone maker is expected to report yet another loss for its first-quarter results. Lumia sales will be one thing, but the company's decreasing cash pile is a whole other worry.

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TOPICS: Nokia
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Nokia announces its third-quarter earnings on Thursday. With so many lemons, why is it not making any lemonade?

Nokia_Lumia_900
(Image: CNET)

Analysts are pegging the upcoming earnings results as the "make or break quarter" for Nokia, which has struggled in the past couple of years with poor Windows Phone 8 device sales.

Nokia is expected to lose €0.04 ($0.05 cents) per share on revenue of €6.63 billion ($8.73bn). According to analysts, cash is expected to settle at €3.7 billion ($4.87bn) compared to €4.4 billion ($5.79bn) at the fourth-quarter count.

It's not a great picture, but Nokia can stay afloat a little longer. The trouble is that Nokia's Windows Phone strategy remains unclear and has, at this point, little direction, except for an attempt to flood the market.

There are two things to look out for when the earnings break on Thursday:

  • The (continued) burn rate of how much Nokia is churning through its cash reserves, as a result of declining revenue and overall profits

  • Lumia performance, and whether Windows Phone 8 is helping boost sales.

The range of Lumia devices that the Finnish phone maker has on the market has been widely considered as the last gasp of air the company will breathe, with a string of quarterly losses and a declining cash pile.

Of all things to look out for, it's Lumia sales. Supply was generally problematic during the first quarter, although a growth in the number of regions selling the Windows Phone-powered Lumia may have boosted numbers.

Analysts are expecting between 4.8 and 5.8 million Lumia devices sold during the three-month period ending March 31.

With the majority of devices being sold expected to run the latest Windows Phone 8 software — compared to the fourth quarter, which was largely driven by the discounted Windows Phone 7.5-powered Lumia 800 — it's hoped that Nokia's continued Windows Phone 8 strategy may be enough to carry it on in subsequent quarters.

What's preventing Nokia from sinking further is an emerging market grasp on the Asha and Symbian-based devices that still remain popular in certain parts of the world.

The latest comScore figures show that Symbian's market share remains flat. While Nokia had been hoping that Symbian figures continued to decline in favor of the higher-profit devices, Symbian's market share remains flat month on month.

Nokia is still expected to sell around 72 million devices in total during the first quarter, down around 20 percent year on year, with Lumia devices taking just 7 percent.

Analysts are expecting the gross margins of Nokia's Smart Device unit — which includes the Lumia range of devices — to increase sequentially, due largely to a lower mix of low or negative margin Symbian devices compared to the fourth quarter.

The bottom line: Nokia has all the lemons, but will likely make little lemonade. Windows Phone is a strong platform, and reviewers have fawned over the Lumia hardware. But by failing to keep ahead of the curve, Nokia has fallen behind out of sight, and can only be heard by its faint whispers at a distance.

Nokia's recovery — if there will be one — will start now, or never. There are only so many times we can keep cheering on the guy at the back of the race.

Topic: Nokia

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19 comments
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  • Expertise

    "Analysts are pegging the upcoming earnings results as the "make or break quarter" for Nokia, which has struggled in the past couple of YEARS with poor WINDOWS PHONE 8 device sales."

    I can't assume you know a lot about Nokia and Windows Phone devices. I stop reading.
    VFontanesi
    • i stopped reading

      I stopped reading when he said nokia were flooding the market....

      4 devices =flooding the market.........
      danjames2012
      • Dubious

        Apparently according to this story Nokia are going to lose 700 million in the next quarter, even though they sell more Lumia phones then the previous quarter that included some discounted previous generation devices.

        Very dubious about the story, Nokia themselves predicted a small small profit/small loss this quarter in Q4. Looking at events though they seem to be pesemistic since new phones that have been launched such as the Lumia 620 have sold out in the UK at times. As well as this older 7.8 phones are continuing to sell at very low price points (£85 in Tesco's) showing that they can compete at many price points.

        My guess is that the original analysts who put this up were priming the stock for a good profit by pushing it lower with a very pesemistic forcast, to then make the big profits when a perfectly normal (now sounding fantastic) quarterly report is made.
        EddieLomax
  • Meh

    Meh
    Zarniw00p
  • Ironic That S40/Symbian Is Still The Only Thing Keeping The Company Afloat

    How long can the Redmond Reality Distortion Field last?
    ldo17
  • Nokia has nothing to worry

    The new Lumia devices are selling very well. This quarter results will probably make Zack W to finally shut up and stop spreading FUD againt Nokia and MS.
    Owllll1net
    • Care to share any specifics?

      Way to put yourself out there...such specificity. A bold...and bald....statement "selling very well". What the heck does that even mean?

      Would you please specify...exactly how many Lumias is "very well"?
      UGottaBKidding
    • Define "selling very well"

      NOKIA were selling > 28 million smartphones per quarter until Elop sabotaged Symbian. The smartphone market has doubled in size since then.

      In a market twice the size Microsoft's Trojan horse will trumpet success if NOKIA reach a quarter of their former number of units sold.

      NOKIA can not reach anywhere near their former levels despite having much more competitive hardware. The problem? Windows Phone. No manufacturer has ever had a success with Windows Phone.
      URNumber6
      • Nokia sold

        almost 6 million Lumia phones.
        Results released.
        Azzras
  • I hear some people talk about

    The Lumia line which is something I am not used to when it comes to a phone made by Nokia. So they definitely gained some mind share.
    Throw All The Things
  • Well I was expecting lumia sales bellow 4 million

    I guess I was being too pessimistic, but I do think they are releasing a lot more devices than I was expecting.
    If they can manage more than 5 million Lumias I think they can still stay afloat, less than that I doubt it. The positive results of the last quarter were related with one off sales - like the headquarter (that now will become extra operation costs).
    Also they are reaching more markets, but all (or near that) those markets where Nokia was really big are becoming smaller for Nokia.

    5 or 6 million Lumias is a poor performance anyway - symbian is going down at an incredible fast pace, while Lumia is growing very slowly.
    AleMartin
  • Nokia Q1 preview: 'Make or break quarter' on Windows Phone sales

    Nokia has been doing very well in mobile phones. In fact they have the #1 selling Microsoft Windows Phone. Somewhere between the Lumia 920 and 822 they have done quite well. They had phones that were #1 on Amazon for quite a while. Make or break, Nokia is selling high quality devices and I'll continue to purchase them.
    Loverock-Davidson
  • Seriously Zach??

    How much money you need to stop writing here. We'll start a kick starter project for you!!

    The whole article is just plain FUD with little content!!

    I thought you've grown up [after thinking yourself as ultra Gen y for many years], maybe you were copying or just quoting some other smart guys in some of your recent articles, but nah i was wrong.

    You've to stop writing!!
    deep@...
  • Obviously pessimistic about Nokia

    This article and the author are blatantly pessimistic. That's ok, sure; everyone's got an opinion.

    But to cover that up with generalities about what analysts and markets and individual traders think is misleading yourself, not just the audience.

    Turns out my view is equally optimistic and there is plenty of concurrence out there that Nokia isn't doomed to failure.

    "Nokia announces its third-quarter earnings on Thursday." No, it announces 1Q13 results, not third quarter.

    "Analysts are pegging the upcoming earnings results as the "make or break quarter" for Nokia, which has struggled in the past couple of years with poor Windows Phone 8 device sales." Um, first WP8 device came out mid-Q4. Prior to that, Nokia was selling WP7, WP7.5, WP7.8 devices. And yes, there were reasons why some people waited for WP8. WP8 share of WP market is staggering for being five months old. comScore and AdDuplex show a rise in user base of WP, and 80% of the gain is at Nokia's hands. BBRY is losing share, Android is losing share in the US... only WP and iOS are gaining. Yes, it's only +.2% of US market, but it's the right direction, and comes at the expense of the competition, so it's chewing into prospective (potentially loyal) customers.

    "The (continued) burn rate of how much Nokia is churning through its cash reserves, as a result of declining revenue and overall profits." In Q4 numbers, cash reserves increased from $4.6B to $5.8B. Decidedly your information is misleading.


    "Of all things to look out for, it's Lumia sales. Supply was generally problematic during the first quarter, although a growth in the number of regions selling the Windows Phone-powered Lumia may have boosted numbers." Which is it? How can you boost numbers above supply? The numbers will be the numbers... And consensus out there seems to be that the supply issues reported in Q4 were resolved in Q1, so I don't know where you got the information that Q1 supplies were "generally problematic during the first quarter."

    Interesting just how much variation there is between the doomsayers and the evangelists amongst the analyst/journalist community.
    jeffdp@...
  • Is It Really Make or Break?

    I hear the story and the reaction both ways. If it's truly make-or-break it would be a shame because the Lumia 920 is an indication that the MS/Nokia partnership got something very big very right. If product quality is able to get past the ludicrous debacle that is MS public relations, then the market will validate the Lumia line.

    While the WP has relatively low market share, it is remarkable that Nokia commands such a huge proportion of it, especially given the capabilities of the competition. If MS ever wakes up and trends in the other direction with respect to the effectiveness of its marketing, the platform should do OK.

    It certainly deserves to - the Lumia 920 is an outstanding phone to own and quite worth the price, a bargain in fact. Androids and Apples seem quite good too, but as a customer, I feel like I made the right purchase.
    dhugos@...
  • Zack Whittaker

    A British blogger with a degree in Criminology writing about technical stuffs?

    "Analysts are pegging the upcoming earnings results as the "make or break quarter" for Nokia, which has struggled in the past couple of years with poor Windows Phone 8 device sales."

    The first sentence alone tells you the ignorance of Mr. Whittaker.

    Windows 8 phone was released on October 29, 2012. So that makes it scan 6 months since its introduction. So Nokia could not have struggled with Windows Phone 8 the "past couple of years".

    With only 2 quarters in existence, what makes 2013 Q1 a "make or break" quarter??

    Mr Whittaker should use his Criminology Degree from the University of Kent to go after very bad men instead of writing nonsensical blogs.
    olivetyson
    • Re: degree in Criminology writing about technical stuffs?

      Or, more accurately, MICROSOFT "stuffs".

      Appropriate, no?
      ldo17
  • And to update this

    Nokia beat expectations selling almost 6mil Lumia devices.
    Azzras
  • Nokia will be AOK

    Nokia and Windows Phone are an outstanding combination, but Lumia is still the new kid on the block compared to the other platforms. Right now momentum is building in a realistic way - that is, better than ever, but still slow enough so Apple and Android PR tech gurus can spin spin spin away. This article in almost unbiased compared to some others. Make or break? I'm pretty sure they're making, not breaking. Nokia technology is stunning enough to make the most vehement trolls sizzle with envy.
    angusdegraosta