Nokia playing for survival after another loss-making quarter

Struggling handset maker Nokia has posted its fifth consecutive quarterly loss. The firm recorded an operating loss of €576m ($752) for the quarter ending September 30, 2012, dwarfing the €71m loss the firm posted in the same period in 2011. Net sales also dropped 19 per cent year-on-year from €8.98bn to €7.24bn

Malik Saadi, principal analyst for handset and devices at Informa Telecoms and Media, said that investors must be losing patience and suggested that they would soon be considering options to dissolve the business.

“The situation is getting critical. Nokia cannot afford another bad quarter, it’s now playing for its survival over the next two quarters,” he said.

“I don’t think investors will afford Nokia another bad quarter and Q4 is going to be very tough, the competition is very intense.”

He suggested that Nokia could be the subject of a takeover if the situation does not improve, as potential buyers would be attracted by its 10,000 patents and strength in industrial design. He indicated that Microsoft could be a potential suitor, given that around 70 per cent of Windows Phones sold globally are Nokia devices.

The firm saw its net sales fall in every region it operates in during the quarter, aside from Latin America, where there was a 14 per cent year-on-year increase. In Greater China, sales fell a huge 78 per cent, from €1.24bn to €278m. CEO Stephen Elop admitted that the period had been “a tough transitional quarter”.

“While we continue to focus on transitioning Nokia, we are determined to carefully manage our financial resources, improve our competitiveness, return our devices and services business to positive operating cash flow as quickly as possible, and ultimately provide more value to our shareholders.”

But in Saadi’s view, the Finnish firm’s marketing strategy is the key reason for its demise. He explained that Nokia’s approach to launching new handsets has been unsuccessful.

“When Apple launches a new product, it will announce to the media that there will be an event months in advance. That creates excitement about what is next. Then it unveils the device. A few days after that, the device is in the market.

“Nokia does exactly the opposite. It will showcase the phone before it is ready to go out, meaning that analysts and journalist do not have a chance to see it properly, use it and review it. They can only rely only on Nokia’s marketing materials. And then it launches the phone into the market two months later, when everyone has forgotten about it.”


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