Nokia Takes Big Q1 Hit; Looks For Lumia Bright Spots


Nokia warned investors last week that its first-quarter earnings would be weaker than projected. On Thursday, the Finnish smartphone maker detailed just how big a hit it took, reporting a loss of $1.8 billion on revenue of $9.7 billion, which is down 30 percent from the $13.6 billion it saw in the same quarter last year.

Nokia attributed the loss to "greater-than-expected competitive challenges" in the mobile market. First-quarter sales for its smart devices and mobile phones were down 52 percent and 32 percent, respectively, as its line of smartphones and feature phones continue to face steep competition from mobile giants Apple and Google.

"We were clearly disappointed with our performance in Q1 2012," said Nokia CEO Stephen Elop during a conference call Thursday announcing the results. "It reflects both the transition that Nokia is currently undergoing as well as the increase in competitive pressures within our industry."

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Elop said that recent shifts in the smartphone industry -- especially the growing emphasis consumers are putting on app ecosystems, rather than device hardware -- has put increased pressure on the company. But, through its recent alliance with Microsoft, Nokia is working to build a more robust app offering for its Lumia line of smartphones, which run on Windows Phone OS.

"We entered into a comprehensive partnership with Microsoft to improve the competitiveness of our smartphones and to differentiate against Android and Apple," Elop said. "With this unique partnership, we gained advantages and have, for instance, received continued support from Microsoft in the form of go-to-market and R&D cooperation that, this year alone, will total $1 billion."

In response to rising consumer demand for apps, Nokia is working with Microsoft to attract new developers to the Windows Phone platform, which today hosts about 80,000 applications, according to Elop. Mobile research firm Mobilewalla reported this week that Google’s Android, in comparison, has more than 300,000 apps and Apple’s iOS more than 600,000.

Elop said that sales of its four Lumia devices -- the Lumia 610, Lumia 710, Lumia 800 and highest-end Lumia 900 -- reached about 2 million in the first quarter but that market reaction to the phones has been mixed.

"Doubling the number of Lumia devices sold quarter on quarter is a respectable pace; however, the sales results have been mixed," he said on the call. "We exceeded expectations in markets like the United States, but establishing momentum in certain markets, including the United Kingdom, has been more challenging."

Reports surfaced earlier this week suggesting the Lumia series was not selling well in Europe. Telecom operators reportedly told Reuters that consumer demand was low because of the phones’ more modest app count and a "lack of marketing dollars" being put behind them.

In addition to sluggish smartphone sales, Nokia said its first-quarter loss can also be attributed to a $1 billion restructuring charge at Nokia Siemens, the telecommunications joint venture it launched with Siemens in 2007. Last November, Nokia said it would need to cut 17,000 jobs at Nokia Siemens in an effort to save on operating costs.