Nokia slumps to loss as sales falter again

HELSINKI—Finland’s Nokia, struggling to hold onto its place as the world’s number one mobile phone maker, slumped Thursday to only its second quarterly loss since 1998 as sales continued to fall.

Having pinned its hopes for recovery on a tie-up with US giant Microsoft, Nokia reported a three months to June net loss of 368 million euros ($520.5 million), compared to a profit of 227 million euros in second quarter 2010.

Analysts had expected a net loss of 104 million euros, according to a poll by Dow Jones Newswires, which would still have seen the once iconic company in the red for only the second time since it became world leader in 1998.

The second quarter “was a disappointment but as we head into (the third quarter) our team is executing very well on our strategy and we’re starting to see a very positive impact on the health of the company,” chief executive Stephen Elop told analysts after the results.

Sales fell 7.3 percent to 9.3 billion euros as Nokia continued to lose market share to competitors such as Apple who have taken the lead with their smartphone offerings, sending its shares tumbling to levels last seen in 1997.

In late afternoon trade Thursday, Nokia was up 1.2 percent, however, as investors looked further into the results and found some limited positives and investors hoped Elop and the Microsoft tie-up will turn its fortunes around.

“In this case, you have to look at the non-IFRS (accounting standard) result, which was actually a bit better than expected,” FIM Bank analyst Michael Schroeder told AFP, citing a 239 million euro profit based on local norms.

Elop said Thursday he was confident that the company would ship its first Windows-based device this year, and ship in volume next year, while the two partners worked to bring Microsoft’s pricing down to more competitive levels.

In the meantime, he said, Nokia plans to introduce “up to ten new Symbian products” in the next few months although the company is dropping this platform in favour of Microsoft’s.

Nordea Bank analyst Sami Sarkamies told AFP that Nokia will struggle to sell these products at a time when consumers largely feel that Symbian is a dead-end technology.

“After February, there were fears that Nokia would have to sell its Symbian phones really cheaply in order to keep hold of what market share they could until the Windows phones were ready – and it looks like this is exactly what’s happening,” Sarkamies said.

Nokia declined to issue any guidance on third quarter sales or revenue expectations and offered what Sarkamies considered an “unusually wide target range” for its non-IFRS operating margin, which in a nutshell would be around or slightly above break-even.
Sarkamies said he believes Nokia’s third quarter will be worse than the second but Schroeder said that even a break-even operating margin “could be seen as positive” given the circumstances.

The company hoped that the ramp-up of dual-SIM mobiles, an aggressive marketing campaign as well as a generally better global economy would help third quarter sales.

“We are making better-than expected progress toward our strategic goals,” insisted Elop.

This strategy was coupled with plans to cut 4,000 jobs and outsource another 3,000 to Accenture, as part of a massive effort to slash operating expenses by one billion euros in 2013 compared with 2010 — a target Elop said Thursday they planned to exceed.
Nonetheless, it will be exceedingly difficult for Nokia to claw back the ground it is rapidly losing.

Sarkamies said analysts now put Nokia’s global market share at about 23 percent, down from 33 percent for the second quarter of 2010 and a far cry from the 40 percent the company held in the first half of 2008.

Although still the world’s top mobile phone maker, Nokia’s market value has plummeted to 14.2 billion euros from nearly 100 billion euros in November 2007.