Lumia shipments hit new high as Nokia cuts losses, but sales still shrinking

Nokia has turned in its results for the second quarter of this year, delivering a curate's egg as it continues its turnaround efforts.
Written by Jo Best, Contributor
The Nokia 1020 with camera grip accessory. Image: Nokia

Nokia announced mixed bag of results today, with the company seeing sales continuing to fall, but losses seemingly stemmed and Lumia shipments hitting a new high.

Its second quarter results, announced on Thursday, saw Nokia's revenue reach €5.7bn, down three percent quarter-on-quarter but 24 percent down year-on-year. Over the first half of 2013, Nokia's revenue was €11.5bn, down 22 percent year-on-year.

However, it made an operating loss of €115m, compared to the loss of €826m in the second quarter of 2012, and €150m a quarter ago. (As well as the oft-mentioned cost controls brought in of late, including travel bans, a sizeable drop in headcount has probably helped here: there are almost 26,000 fewer Nokians this year compared to last.)

Device volumes also told a shrinking story, with sales of both its smartphones and lower-end featurephones decreasing by 27 percent year-on-year.

Nokia's Mobile Phones unit, which deals with non-smartphones, sold 53.7 million devices in the second quarter compared to 73.5 million a year ago. However, demand "demonstrated some signs of recovery in the latter part of the quarter", Nokia said.

In the Smart Device segment, volumes fell from 10.2 million in the second quarter of 2012 to 7.4 million this quarter. However, that may be a victory of sorts: Nokia has finally stopped selling the last of its Symbian phones (six million of which were shipped in Q1, virtually none this quarter), meaning the entirety of Smart Devices sales will now be Lumias.

At 7.4 million Lumias shipped, that's the highest Nokia has managed in any quarter so far, and up on the 5.6 million it sold in the last quarter.

And, thanks to the shift to Lumia, the average selling prices of those devices are on the up: €157 now, compared to €151 a year ago.

It's not all good news with Lumia, of course: year-on-year, Nokia noted device sales were down by 26 percent in Europe and 48 percent in China, which it said was "primarily due to lower sales in our Smart Devices business unit".

According to the most recent figures from analyst house Gartner, Nokia's share of the global mobile market is around 15 percent, making it the second-place handset company behind Samsung. However, it's a different picture in smartphones, where its three percent share makes it the 10th place vendor.

Over the last quarter, Nokia has made a couple of notable additions to its Lumia range: the 925, an all-purpose high-end smartphone, and its current imaging flagship, the 1020, which comes with a 41-megapixel sensor.

It also moved to address the earlier drop in demand for its featurephone line, adding a new top-of-the-range Asha, the 501, and updating the OS, Series 40,  that underpins most of its lower-end devices to bring in more smartphone-type UI features.

Expect more product revamping at the lower end, according to chief executive Stephen Elop.

"Our Mobile Phones business unit started to demonstrate some signs of recovery in the latter part of the second quarter following a difficult start to the year. Also, towards the end of the second quarter, we started to ship the Asha 501, which brings a new design and user experience to the highly competitive sub-100 USD market. While we are very encouraged by the consumer response to our innovations in this price category, our Mobile Phones business unit is planning to take actions to focus its product offering and improve product competitiveness," he said in a statement.

There will also be a restructure of the Mobile Phones unit, which will result in 440 layoffs, the company said.

Elsewhere, the company gave its bottom line a sizeable boost by buying Siemens out of the companies' joint venture, Nokia Siemens Networks. Unlike Nokia itself, the networking business has remained profitable over the last year and beyond.

For the current quarter, NSN bought in around half of Nokia's overall revenue.

On the services front, again, there are highs and lows. Revenue from Nokia's mapping business Here rose by eight percent quarter on quarter, but was down 18 percent on last year. The 2013 growth comes from more vehicle sales with Honda, Nissan and Ford, the company said.

Third quarter outlook

Nokia is predicting a two percent operating loss for the third quarter of this year.

"This outlook is based on Nokia's expectations regarding a number of factors, including:

  • competitive industry dynamics continuing to negatively affect Devices & Services;
  • consumer demand for our products;
  • ramp-up for our high-end Lumia smartphones and new Mobile Phones devices;
  • expected increases in Devices & Services' operating expenses; and
  • the macroeconomic environment," Nokia said in a statement.

 However, it also expects higher sales too, thanks in part to new Lumia devices joining its lineup.

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