Nokia loss an improvement but future still uncertain

Finnish handset manufacturer Nokia has posted a €150m operating loss for 1Q13. Viewed in context this should be encouraging; the loss is a fraction of the €1.338bn the firm lost in the same quarter in 2012.

However, net sales for the same period dropped 20 per cent year on year to €5.85bn from €7.35bn in 1Q12.

The handset vendor sold 61.9 million devices in the quarter, 25 per cent fewer than the 82.7 million it sold in 1Q12 and saw sales drop year on year in every geographic region it operates in, with the exception of North America, which ironically is the company’s weakest traditional market.

CEO Stephen Elop claimed Nokia is executing its strategy with “urgency” and managing costs “very well”.

“We have areas where we are making progress, and areas where we are further increasing the focus,” he said. “For example, people are responding positively to the Lumia portfolio, and our volumes are increasing quarter over quarter.”

He acknowledged that the firm has a tall order trying to reclaim one of the top spots in the handset market.

“Our Mobile Phones business faces a difficult competitive environment, and we are taking tactical actions and bringing new innovation to market to address our challenges.”

According to Fred Huet, managing partner at Greenwich Consulting, Nokia has been performing well in emerging markets, but the challenge ahead of the firm is sustaining its momentum as those markets become increasingly competitive.

“Everyone is now spotting that the emerging market space is strong in terms of growth in smartphones; the projections for smartphones in those regions are quite high, so now everyone’s turning their attention to them,” he said.

“In India, for example, Nokia has performed well but it’s becoming a more competitive market, because of the Chinese and Korean handset manufacturers.  Samsung has now launched some handsets specifically designed for emerging markets. China is very good at producing low cost and mass production handsets, so the question is how long can Nokia keep momentum?”

Huet added that Nokia’s decision to rely heavily on Microsoft as its OS partner for smartphones is not paying off.

“Two years ago, I thought it was interesting proposition; Nokia is good with hardware and Microsoft is good with software. But Microsoft’s Windows Phone platform is not getting the traction the firm was expecting and in the meantime, Blackberry is slowly turning round its fortunes after consecutive quarters of market share loss in developed markets.”