Nokia earnings fail to shine despite Lumia

Nokia has reported a loss of more than €1bn in the fourth quarter, but said it is now on track to establishing itself as a top-performing Windows Phone manufacturer, thanks to the Lumia range
Written by Ben Woods, Contributor

Nokia has posted a loss of €1.07bn for the fourth quarter, dragged down by falling smartphone sales despite a strong showing for its recently launched Windows Phone based Lumia handsets.

On Thursday, the Finnish handset maker reported a 21 percent year-on-year decline in all sales to €10bn (£8.36bn) in the last three months of 2011. Handset sales decreased by 29 percent to €6bn. In particular, smart device revenue dropped 38 percent to €2.7bn, with shipments falling by 13 percent to 19 million, even though Nokia introduced and sold more than 1 million Lumia smartphones during the quarter.

The figures suggest the company is struggling to make financial headway, even after a change in strategy and its deal with Microsoft in February to use Windows Phone as its primary platform. By comparison, Apple reported on Tuesday it sold more than 37 million iPhones in its 14-week fourth quarter, which resulted in more than $13bn (£8.27bn) in net profit.

Despite this, Nokia's chief executive Stephen Elop focused on the high points in the quarter, which saw it launch the Symbian-based Asha range of handsets for emerging markets and re-enter the US market with the Lumia range.

"In the war of ecosystems, clearly there are some strong contenders already on the field. And with Lumia, we have demonstrated that we belong on the field," Elop said in a statement. "Our specific intent has been to establish a beachhead in this war of ecosystems, and country by country that is what we are now accomplishing."

Lumia's sales varied widely by region, and Elop said the UK market, where it has released the Lumia 800 but not the the Lumia 900, delivered a "mixed performance" due to "firmly entrenched ecosystems". In response, Nokia plans to "improve retail execution" through training of sales associates.

Symbian sales

The fourth quarter weighed heavily on Nokia's full-year earnings, also released on Thursday. In 2011, it lost €1.5bn, compared with a profit of €1.3bn the previous year. Sales and profitability were hit as rivals made inroads against Symbian and as its prices came under pressure in both smartphones and feature phones, the company said.


Elop noted Symbian sales figures were lower than previously expected due to "changing market conditions" and the strong performance of its Windows Phone handsets. However, Nokia said it will continue to support Symbian until 2016.

"As expected, the transition from Symbian to Windows Phones is still a painful process for the company. Despite the latest improvements in Symbian's user interface and the launch of a few new devices, it's now clear that Nokia will not be able to continue to rely on Symbian and needs to move even faster to Windows Phones," said Francisco Jeronimo, European research manager for mobile devices at IDC.

Nokia is performing well among companies that make Windows Phone-based devices, as it provides differentiated hardware and custom services, such as Nokia Drive and Nokia Music. In its earnings report, the company revealed it received a platform payment of €180m to switch to the Microsoft operating system for its smartphones.

Windows Phone-based smartphones from HTC and Samsung were significantly affected by the introduction of the Lumia series, which suggests a "clear dominance for Nokia in the Windows Phones space over the next few quarters," Jeronimo said.

"Despite this, the outlook for Nokia in the next two quarters is still gloomy. Windows Phones volumes will not be enough to offset the decline of Symbian," Jeronimo said.

"To become profitable, Nokia needs to continue its restructuring program by cutting costs and focusing on delivering more devices faster, than before at different price points and to push the services that can help it differentiate in the Windows Phones ecosystem," he added.

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