Nokia has posted a loss of €969m for its most recent quarter – a shallower loss than its previous quarter – raising the stakes for its forthcoming launch of new Windows Phone 8 devices.
CEO Stephen Elop's prediction in July that its third quarter would be 'difficult' bore fruit and the manufacturer will be hopeful consumers are waiting to buy into its pending Lumia 920 and 820 handsets. In its devices and services division, which includes its handset performance, net sales were €3.56bn, down 11% on the previous quarter and down 34% on the previous year. Its Symbian smartphones are still continuing to outsell its Lumia devices. Nokia recorded 2.9 million Lumia sales in Q3 but had 6.3 million smartphone sales, down 38% on the previous quarter and 63% year on year. By comparison, Apple reported sales of its iPhone 5 hit 5 million during its opening weekend of sale last month.
The switch from Symbian to Windows Phone was continuing to hit Nokia. The devices division posted an operating loss of €683m, a 44% increase on its €474m loss in Q3 although the manufacturer was affected by €454m in restructuring costs during the quarter. Smartphone sales were €976m, down 37% on the Q2 and 56% lower than 2011. By contrast its feature phone sales were €2.37bn, up 3% on Q2 but down 19% on 2011.
Nokia said its smartphone performance was hit by the 'strong momentum of competing platforms'. While the average selling price of its Symbian devices actually increased, Nokia continued to cut the price of its Lumia portfolio. The ASP of those devices was €160, 14.0% lower than in Q2. Nokia's operating margin was much lower than the previous quarter, -19.2% compared to -11.8%.
Device sales in Europe fell by 10% during the quarter to €985m, and were down 29% on 2011. Nokia blamed this on lower sales of its smartphone portfolio. However, volume sales were up 10% to 16.8 million quarter on quarter, although it was down 19% on the previous year, which the manufacturer said was driven by an increase in feature phone sales. However, its sharpest quarter on quarter losses were in North America (72%) and Greater China (49%).
Despite the launch of its forthcoming Windows Phone 8 devices within the coming weeks, Nokia was gloomy about the months ahead. It predicted a Q4 operating margin of -6% because of heightened competition, an increase in spending to try and drive the sales of new devices. It warned its smartphone division would have a 'challenging' quarter and said it would have a 'lower-than-normal benefit from seasonality in volumes', which it said was due to the switch to Lumia and the plans for its new devices. It revealed it spent €633m in cash during the quarter and holds net cash reserves of €3.56bn.
Nokia CEO Stephen Elop described the quarter as 'difficult' but said he was pleased the business made an operating profit of €78m once exceptional items were removed. He said: 'In Q3, we continued to manage through a tough transitional quarter for our smart devices business as we shared the exciting innovation ahead with our new line of Lumia products.'
IHS Global Insight analyst Peter Boyland said: 'While it has included high-quality cameras and an improved mapping system in its new Lumia handsets, this is unlikely to make up for fewer apps that are available on the Windows OS, and the simple fact that Nokia is no longer seen as a leading brand. With sales of its flagship Lumia models falling, investors are rapidly losing faith that Nokia can make good on its late entry to the smartphone sector.'
He added: 'Nokia's long-term survival is dependent on breaking into the smartphone market, and if the vendor cannot show signs of a significant turnaround in the last quarter of the year, there will be further calls for drastic changes in strategy and personnel.'
Editor: Graeme Neill