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Nokia Q4-2012: EUR 439M Operating Profit; 86M Devices Sold, 9.3M Asha


Nokia has finally made a turnaround during the quarter ending December 31, 2012, posting an operating profit of EUR 439 million ($585 million) as compared to EUR 954 million ($1.27 billion) loss in the same quarter last year and EUR 576 million ($767.6) loss in the previous quarter. For the fiscal ending December 31, 2012, Nokia however reported an operating loss of EUR 2.3 billion ($3.07 billion), a significant increase from EUR 1.07 billion ($1.43 billion) in the fiscal 2011.

The company reported a net sales of EUR 8.04 billion ($10.71 billion) for the quarter, a 20% decline from EUR 10 billion ($13.33 billion) in the same quarter last year but a 11% increase from EUR 7.24 billion ($9.65 billion) from the previous quarter. For the fiscal ending 2012, Nokia reported net sales of EUR 30.18 billion ($40.22 billion), a 22% decline from EUR 38.66 billion ($51.52 billion) in the fiscal 2011.

Operating Highlights

- Nokia has sold 4.4 million Lumia smartphones and 2.2 million Symbian smartphones during the quarter. It has sold 9.3 million Asha full touch smartphones for the quarter, up from 6.5 million units in the previous quarter.

- Nokia started shipping its first Windows Phone 8 devices – Nokia Lumia 920 and Nokia Lumia 820. It also started shipping Nokia Lumia 822 for Verizon Wireless and Lumia 920T for China Mobile.

- Nokia announced Nokia Lumia 620, the third and its most affordable Windows Phone 8 smartphone.

- Nokia announced Nokia Asha 205, Nokia Asha 206 in both single SIM and dual versions. Both these smartphones also came with a new Slam feature, which enabled users to share multimedia content like photos and videos to any bluetooth-enabled mobile phones nearby. Nokia also started shipping Nokia Asha 308 and Nokia Asha 309.

- Nokia completed its Vertu divestment to EQT VI and as part of the transaction, it transferred around 1000 employees to Vertu and continues to hold 10% stake in the company.

- Nokia has entered into a new patent license agreement with Research In Motion to settle all its patent litigation cases.

- Nokia sold its head office building in Espoo, Finland to Finland-based Exilion for EUR 170 million ($226.6 million) and leased it back on a long term lease.

- Nokia rebranded its location and mapping service as HERE platform and has started using HERE brand in its portfolio. Nokia stated that it will rename the Location & Commerce business as HERE business for financial reporting purposes, starting from Q1 2013.

- The company also launched a HTML5-based maps application for iOS under the HERE brand and announced an augmented reality technology called LiveSight. Nokia City Lens app is based on LiveSight technology.

- Nokia inked a strategic partnership to offer new location experiences to the Firefox OS. It plans to debut a mobile web version of HERE maps for Firefox OS next year.

- Nokia partnered with Groupon to integrate Groupon Now! deals into its maps desktop offering on here.com.

- Nokia acquired a 3D mapping company Earthmine Inc. While the exact monetary details of the acquisition were not disclosed, Nokia said that Earthmine’s reality capture and processing technologies will become an integral part of HERE’s 3D map making capabilities.

- Nokia launched Nokia Maps and Nokia Drive+ (beta) for Windows 8 and released updated versions of Nokia Transport and Nokia Drive to Windows Phone 7.5, to extend My Commute feature in Nokia Drive from five to 26 countries. It also released a beta version of Nokia City Lens for Lumia devices running on Windows Phone 7.5.

- Oracle developed a built-in link between Oracle Fusion Middleware MapViewer and Nokia Location Platform (NLP).

Payment from Microsoft: For the quarter, Nokia received a platform support payment of $250 million (EUR 202 million) from Microsoft. This is the same amount that it received in earlier tranches. The company said that it has a competitive software royalty structure, which includes minimum software royalty commitments. Over the life of the agreement, both the platform support payments and the minimum software royalty commitments is expected to slightly exceed the total amount of the minimum software royalty commitments.

Nokia noted that till date, the amount of platform support payments received by Nokia has exceeded the amount of minimum royalty commitment payments to Microsoft. Hence, for the remainder of the agreement life, the total amount of the minimum software royalty commitment payments to Microsoft is expected to exceed the total amount of the platform support payments received by Nokia.

Financials

Devices and Services Segment: Nokia’s devices and services segment business accounted for EUR 3.85 billion ($5.13 billion) revenue of the company’s net sales for the quarter ending December 30, 2012, down 36% year-on-year, but up 8% sequentially. The segment reported operating profit of EUR 276 million ($367.83 million), up 36% YoY from EUR 203 million ($270.54 million).

Smartphone sales decreased by 55% to EUR 1.22 billion ($1.63 billion) for the quarter while Mobile Phones sales decreased by 19% to EUR 2.47 billion ($3.29 billion) for the quarter.  Smartphones segment reported an operating loss of EUR 264 million ($351.8 million) for the quarter while the Mobile phones segment reported an operating profit of EUR 203 million ($270.54 million).

In terms of volume, Smartphone sales decreased by 66% YoY to 6.6 million units while mobile phones sales decreased by 15% YoY to 79.6 million units. Overall, the mobile device sales decreased by 24% YoY to 86.3 million units.

The average selling price of smartphones increased by 33% to 186 for the quarter while the average selling price of mobile phones marginally decreased by 3% to 31. Overall, the average selling price decreased by 15% to 45 for the quarter.

Location and Commerce segment: Nokia’s Location & Commerce segment accounted for EUR 278 million ($370.5 million) of the company’s net sales for the quarter, down 9% YoY from EUR 306 million ($407.8 million) but up 5% sequentially. The segment reported an operating loss of EUR 56 million ($74.63 million), a significant improvement from EUR 1.2 billion ($1.6 billion) loss in the same quarter last year.

Future Outlook

Nokia expects its Devices & Services non-IFRS operating margin in Q1 2013 to be approximately negative 2% plus or minus four percentage points. It plans to reduce its its Devices & Services non-IFRS operating expenses to an annualized run rate of around EUR 3.0 billion ($4 billion) by the end of 2013. It also expects the Location and Commerce non-IFRS operating margin to be negative in Q1 2013, due to lower recognized revenues from internal sales which carry higher gross margins.

DownloadNokia Q4 2012 Report

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