Nokia's sale of four million Lumia devices during its last quarter did not stop the manufacturer reporting a loss of €1.41bn, down sharply on last year's loss of €368m.
The transition away from Symbian to Windows Phone continued to hit its smartphone sales. Net smart device sales were 1.54 billion, down 34% on last year, but a 10% drop on its previous quarter. Volume sales were down 39% to 10.2 million, with the average selling price up 7% to €151. However, gross margin was down drastically from 23% last year to 1.7%, leading to suggestions Nokia was cutting the prices of its Lumia portfolio in order to drive sales.
The average selling price of Lumia devices was €186 during the second quarter, compared to €220 during Q1. Nokia said the 'significant' gross margin decline was due to €220m write-off comprising excess component inventory, future purchase commitments and a Lumia inventory revaluation.
Nokia CEO Stephen Elop warned the third quarter would remain 'difficult', with its smartphone wing singled out to have a 'challenging' period due to the switch away from Symbian to Windows. Operating margin will be -9.1%, plus or minor four percentage points, which is in line with its second quarter.
Elop said: 'Nokia is taking action to manage through this transition period. While Q2 was a difficult quarter, Nokia employees are demonstrating their determination to strengthen our competitiveness, improve our operating model and carefully manage our financial resources...While Q3 will remain difficult, it is a critical priority to return our devices and services business to positive operating cash flow as quickly as possible.'
Elop added that he expected the forthcoming Windows Phone 8 OS to be an 'important catalyst' for the Lumia range, despite none of the current devices being able to run the new operating system.
Across its feature phone business, sales were €2.29bn, down 11% year on year. Volume sales increased 2% to 73.5 million. Average selling price was €31, down 14% on 2011. However, gross margin only fell by 0.6 percentage points to 24.1%. Nokia said sales of higher priced feature phones were hit by more affordable smartphones, and competitors offering smartphone features like touch-screens on a feature phone.
Last month, Nokia unveiled its strategy to return the business to profit. This included slashing up to 10,000 positions by the end of 2013, prioritising key markets and streamlining back office functions.
Editor: Graeme Neill