Nokia's worst nightmare isn't lacklustre Lumia sales, it's Asha's waning appeal

Nokia's worst nightmare isn't lacklustre Lumia sales, it's Asha's waning appeal

Summary: Nokia missed analyst guidance and has reported declining shipments of its non-Lumia devices, while adding around 25 percent more Lumia shipments to its books - so which should it care about more?

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Nokia's Q1 2013 financial results were released today, with its increasing, but still muted, Lumia shipments grabbing all the headlines. The company's nightmare scenario however isn't failing to convince smartphone buyers to plump for Windows Phone — it's the bottom falling out of its low-to-mid tier devices.

Nokia's smartphone strategy has been well discussed, and like it or lump it, Windows Phone devices are what we'll get for the foreseeable future. But the only thing that allowed the Finnish handset maker to take that leap into the unknown and bet the proverbial farm on Microsoft's mobile OS was its relative strength in other, lower-end markets.

Nokia's Q1 results showing a notable decline in these core non-smartphone markets that have helped keep the company solvent: sales of non-smartphones dropped by around a third year on year. As result, Nokia's position is likely to be more concerning now than when it was scrambling to get its first Lumias out of the door.

Overall, Nokia's mobile shipments — smartphones and feature phones —were down by 25 percent in comparison with the same time last year, with shipments for China alone down 63 percent and the US down by a third.

While the US figure isn't really of much concern (at least in the sense that Nokia has never been a dominant force in the US) the number for China should start alarm bells ringing somewhere inside the company — it certainly seems to have resonated with the investors: since announcing its financials on Thursday, Nokia stock had fallen by around 10 percent at the time of writing.

Add in a 20 percent dive in shipments in Latin America and a 28 percent drop in the Middle East and Africa where smartphones are a tiny piece of Nokia's sales, and the low-to-middling end of Nokia's market starts to look pretty shaky.

One of Nokia's problems is that to succeed — to actually make any real money — in growing or emerging markets it needs to sell its lower-cost devices in huge numbers. With shipments of those handsets now heading downwards, it will need to reverse this trend quickly if it wants to stay relevant in any market.

For its lower-cost devices, Nokia doesn't use Windows Phone (likely because of the hardware requirements and licensing costs), instead favouring the Series 40 feature phone platform. Despite now insisting that its Asha range are smartphones, they still run Series 40.

This is the second of Nokia's problems in markets where it has seen losses over the last quarter – if you had to choose between two phones that cost about the same, would you choose the fully-fledged Android OS or the 'is it, isn't it' a smartphone S40 platform? Seems like a no-brainer to me, and with the cost of Android devices continuing to fall, it's a problem that will only continue to grow unless it's addressed.

The imminent arrival of open-source, low-cost operating systems such as Firefox OS and Ubuntu OS will only add to the number and variety of low-cost devices aimed at this end of the market too, further compounding the challenge for Nokia.

On the positive side, its Lumia sales are increasing — just not by enough to offset the declines elsewhere. However, with a higher margin and average selling price per unit for each Lumia sold, it's growing the market that brings in the cash. Perhaps we shouldn't write off Nokia just yet.

Topics: Nokia, Mobility, Smartphones

Ben Woods

About Ben Woods

With several years' experience covering everything in the world of telecoms and mobility, Ben's your man if it involves a smartphone, tablet, laptop, or any other piece of tech small enough to carry around with you.

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12 comments
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  • Right Conclusion Wrong Insight

    Nokia's flagging of Asha sales might be a setback on numbers, but ideally speaking no retailers want to sell Asha phones due to low margin and its clear that Nokia wont also be making much of profit from Asha series. Asha is good to keep them in numbers game and not profits. If lumia sales keep increasing, it will mean that nokia can financially bounce back very well.
    thefinalmiracle
  • Right Conclusion Wrong Insight

    Nokia's flagging of Asha sales might be a setback on numbers, but ideally speaking no retailers want to sell Asha phones due to low margin and its clear that Nokia wont also be making much of profit from Asha series. Asha is good to keep them in numbers game and not profits. If lumia sales keep increasing, it will mean that nokia can financially bounce back very well.
    thefinalmiracle
  • Apple promoters' worst nightmare

    Ben Woods' worst nightmare isn't that Nokia will recover and escape the fate of most Apple's competitors. His (and most of the pro-Apple biased media) is that Lumia's offer a fresh and original alternative to their cult's offering and may prevent Apple "iPodizing" the entire hi-tech sector.
    asherpat
    • What's ben got to do with it?

      He's always reporting on the latest mobile stuff. Apple products must be one of his least reviewed because they release them so infrequently.

      Also did you read the article? Apple promoter? The entire article focuses on Nokia. There is a brief reference to other OS at the end in terms of consumer perception, not device comparison, and here he chooses Android as the competition. He also sights the risks of the new OS coming into the market; ubuntu and Firefox.

      He doesn't even mention apple. Discussing primarily the entry level phones, apple are totally irrelevant here.

      Asherpar, please comment on things he did say, not things you wish he'd said.

      Ben Woods; loving that this article isn't in the slide showformat; lots more please!
      MarknWill
  • actually feeling bad for them

    I don't know how lumias couldn't possibly increase somewhat, considering all the money being blown to push windows phone/RT. I can't believe the # of ads where you see the metro tiles screen posted all over billboards, etc. While I am rooting for the demise of nokia so that MS can add yet another embarassing failure to the list, I'm actually starting to feel a bit bad for those guys. Had android been chosen, they'd be doing much better by now. Now nokia has to watch the low end decline, again probably with MS not allowing them to use android there as part of some agreement.
    drwong
    • Had android been chosen they'd be doing worse than htc, with some slight

      hope of improving to "doing as poorly as htc" sometime a couple years in the future. They made the right move. It's still 2-3 years until it'll be time to take a look at how it worked out.
      Johnny Vegas
    • Wrong

      The market is saturated with Android phones choosing windows phone was a good idea. In my opinion Windows phone 8 is superior to Android by a significant margin and the nokia hardware is top notch. Nokia has a marketing problem the word needs to get out on just how good these phones are and how mature the Windows phone unified ecosystem is.
      ammohunt
    • Question

      Why are you rooting for a company to go under? Would people losing their jobs really make you so happy?
      Michael Alan Goff
    • Now you just proved to us that you are a paid shill like Asok Smith

      and few others to post anything against Microsoft. Glad to know that. Next time onwards, I will try not to read your "Google $ at work" statements.
      Ram U
    • dum dum

      Your name suggest who you're dum dum as in Flinstone! Yu're clueles. Microsoft strategy is playing well. It has stopped Apple iPad momentun that will be felt in following years to come. Nokia strategy is working dum dum, remember, it started from zero and it now selling smart phone more than everybody but Apple and Samsung!
      jonnybr
  • Platform support to reverse

    As the balance of platform support payments in from Microsoft against licensing payments out shift this year from income to outgo for Nokia the outlook is not good. They are already making a loss on this platform and that will not help.

    Also, they are out of Symbian fans to convert and will now have to rely on Windows Phone's ability to bring in net new customers and returning customers.
    symbolset
  • Nokia sales

    Typical ZDnet employers with obsession of Microsoft. Report has it that only Samsung making profit selling Android, I do wonder what would they have Nokia do, makes another Android phone?
    Nokia shifting to Windows phone have made her to make profit not loss. His strategy for Windows phone will soon blossom by making cheap version available. windows phones tend to be too high ends. The cheap one will compete well with cheap melware riddden Androids.
    jonnybr