Related Articles
Screenshot by Crave UK
Nokia, the once-proud Finnish mobile phone giant, is still sinking.
In its second-quarter earnings report, the company posted a net loss of $1.74 billion, with overall sales down 26 percent year over year. Smartphone sales were down by a third in the quarter.
There are two rays of sunshine amid the dark skies over Espoo. Nokia’s cash position is better than analysts expected, and its partnership with Microsoft to use the Windows Phone operating system for its devices is still a going concern. In fact, Nokia shipped four million Lumia smartphones, more than double the number it moved in the previous quarter.
Though that’s a drop in the bucket compared to the 70 million Android devices Google activated during the fourth quarter of 2011, it’s a promising start for a venture crucial to Nokia’s re-emergence as a leading maker of mobile technology — and the silver lining in an earnings report whose other details may well have Nokia executives reaching for the Scotch.
Related stories
- Nokia posts $1 billion operating loss
- Nokia: It may be time to turn out the lights
- Nokia’s Q2: all lemons, little lemonade
The company is well along in shifting its emphasis from Symbian-based devices to those powered by Microsoft’s mobile operating system, a process that’s been under way for the last 18 months. Nokia explained that its declines were partly due to falling demand for Symbian devices, which the newer Lumia devices have so far failed to offset.
North America, where sales of Nokia smartphones rose 45 percent to $157 million, has become a rare bright spot. But the company continued to see sales erosion in Europe, Asia and the Middle East. In Europe, the company shipped just 600,000 devices during the quarter, a 60 percent drop from the same period a year ago.
In the U.S., Nokia slashed the price of its flagship Lumia 900 device by half, from $99 to $49, in an attempt to undercut its rivals and gain traction in a market where it generates a small fraction of its overall revenues. Although it’s also worth noting that these phones are already functionally obsolete, since they won’t be upgraded to Microsoft’s next-generation OS, Windows Phone 8.
The company’s third quarter outlook remains bleak, but Elop said the launch of Windows Phone 8 “will be an important catalyst for Lumia” and, by extension, the company’s fortunes. Still, significant hurdles remain: Nokia’s biggest businesses are in Europe and the Asia-Pacific region, where sales and device volumes have slumped, and the company’s attention has been focused largely on shuttering unused facilities and eliminating tens of thousands of positions as it restructures to better compete with rivals Apple, Google and Samsung.
“Nokia is taking action to manage through this transition period,” Nokia chief executive Stephen Elop said. “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.”
Nokia’s reserves now stand at 4.2 billion euros, or approx. $5.17 billion, down from 4.8 billion euros ($5.9 billion) in the previous quarter. Time is both a blessing and a curse. As sales for its existing businesses continue to plummet, it will need those cash reserves to fund its activities until Microsoft introduces Windows Phone 8, which could deliver a big boost to Lumia sales.
Nokia is hardly alone. BlackBerry maker Research in Motion is also falling into a financial black hole as its core businesses collapse in the wake of steep competition from Apple’s iPhone and Google’s Android devices. That company’s chief executive, Thorsten Heins, is also trying to shrink the company’s footprint as it searches for a hit product that will ensure its survival.
