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Nokia Q4-2012 Concall: Focus Areas, WP8 Opportunities & Unique Experiences


After six consecutive quarters of losses, Nokia had reported an operating profit of €439 million ($585 million) for the quarter ending December 31, 2012 yesterday. It had reported net sales of €8.04 billion ($10.71 billion) for the quarter, a 11% increase from €7.24 billion ($9.65 billion) revenues reported in the previous quarter but a 20% decline from €10 billion ($13.33 billion) revenues reported in the same quarter last year. Here are some notes from Nokia’s Investor conference call:

- First Half Of 2012 Challenging: Nokia CEO Stephen Elop stated that the first half of 2012 was very challenging for Nokia but they are committed to lowering their operating expenditures in spite of investing in various technologies to differentiate Nokia. At the end of 2012, Nokia Group has a gross cash of €9.9 billion ($13.22 billion) and a net cash of €4.4 billion ($5.88 billion)

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- Smartphones: During the quarter, Nokia shipped 6.6 million Smartphones, of which 4.4 million were Lumia devices. Elop said that they are pleased with the initial consumer response to Nokia’s new Lumia devices including the Lumia 920, Lumia 820 and Lumia 620. He mentioned that mobile operators are now committing for more marketing, more training and more in-store displays to help increase Windows Phone and Lumia sales.

- Mobile Phones: Nokia shipped 79.6 million mobile phones units during the quarter, of which 9.3 million units were Asha full touch smartphones. Elop mentioned that Asha was the top selling smartphone in India, Russia, and Saudi Arabia markets during certain months. Elop however expects the next quarter to be seasonally weak and an intense competitive pressure from other platforms.

Elop mentioned that the principal focus with Asha product line is to offer devices at an overall lower ownership cost, which is the reason they have implemented proxy browser technology for apps like Facebook to reduce the data costs for users. He also stated that Series 40 products already has a healthy app ecosystem and they actively talk to developers who are planning to develop for the Windows Phone ecosystem, to develop for the S40 environment and reach out to a much larger customer base than any existing ecosystem.

- Nokia Siemens Networks: Elop said that Nokia Siemens Network (NSN) had a successful 2012 and registered profits for the third straight quarter. Citing third-party market share data, he mentioned that NSN had captured the number two position in the wireless broadband and LTE areas. NSN reported an operating profit of €251 million for the quarter, a massive 275% increase from €67 million profits in Q4-FY11 and a 38% increase from €182 million sequentially. The net sales stood at €3.99 billion ($5.33 billion) for the quarter, up 14% sequentially and 5% YoY.

- Nokia’s Focus Areas: Nokia CFO and Executive Vice President, Timo Ihamuotila said that Nokia’s key three areas of focus were – returning devices and services segment to sustainable positive operative cash flow as soon as possible, NSN continues to be self-funding in all operational aspects, and monetize non-core assets actively.

Elaborating on non-core assets, Ihamuotila mentioned that during the quarter, Nokia sold its head office building in Espoo, Finland to Finland-based Exilion for €170 million ($226.6 million) and leased it back on a long term lease. The company also completed its Vertu divestment to EQT VI for approximately €100 million ($133.6 million). In early December, NSN announced the planned sale of its Business Support System to Redknee and the sale of its Optical Networks businesses to Marlin Equity Partners.

Location and Commerce segment: Nokia’s Location and Commerce segment reported net sales of €278 million ($370.5 million) for the quarter, down 9% YoY from €306 million ($407.8 million) but up 5% from €265 million ($354 million) sequentially. Ihamuotila attributed this increase to the rise in consumers for its vehicle navigation systems and the seasonal higher sales of personal navigation devices to customers.

- Headcount: Ihamuotila mentioned that the Devices & Services and Corporate Common had approximately 33,200 employees at the end of Q4 2012, registering a decline of 16,500 employees year-on-year (YoY) and a decline of 5,000 employees sequentially. NSN had approximately 58,400 employees at the end of Q4 2012, registering a decline of around 15,300 employees YoY and around 2,200 employees sequentially.

- Focus on Unique Features Rather Than Customization: Elop mentioned that they don’t want to do a great deal of customization to the core of Windows Phone platform, since it will lead them to a similar fragmentation situation that Android is currently facing. He pointed out that Google has been making consistent efforts lately to change its open ecosystem to a bit more closed ecosystem.

Elop said that instead of customization, they want to focus on creating devices more efficiently and move them through its production facilities in a most effective manner. He added that they are also making sure to introduce unique capabilities and differentiators to the Windows Phone platform, which includes elements of its HERE platform, augmented reality app City Lens and Nokia Music among others. Going forward, they plan to introduce several differentiators for the imaging segment like Pureview technology, for location and commerce segment and things like wireless charging among others.

- Windows 8 Opportunities: Elop mentioned that they were quite late to the party when they introduced Windows Phone 7 devices since the software was largely already done and they had limited opportunity to introduce unique software differentiators, in comparison to Android and iOS, due to which they focused on delivering good hardware. However, with Windows Phone 8 they have started working on delivering unique software differentiators in the photography and location-based services segment along with other capabilities, which has started appearing in products like Lumia 920.

Related:

- Nokia Q4-2012: EUR 439M Operating Profit; 86M Devices Sold, 9.3M Asha
- Nokia Q3-2012: Net Loss At EUR 576M; Overall Handset Sales Down 34% YoY
- Nokia Q2-2012 Concall: On Windows Phone 8, Location Services & Lumia Devices
- Nokia Net Loss At EUR 1.34B; Overall Handset Sales Down 40% YoY