Nokia continues to report losses in quarter ended 30th June 2011. The company reported net sales of EUR 9.275 billion for the quarter, down 7% year-on-year and 11% sequentially, and its operating losses were at EUR 487 million in contrast to operating profits of EUR 295 million, that it registered in Q2-2010. Nokia CEO, Stephen Elop says that the challenges that the company faced during its strategic transformation (to the Windows Phone Platform), manifested in a greater than expected way in this quarter.

The devices and services segment business of handset major Nokia contributed EUR 5.4 billion to net sales for the quarter ending June 30th 2011, down 20% year-on-year and 23% sequentially. The segment reported operating losses of EUR 247 million compared to operating profits of EUR 643 million that the company reported in the same quarter, last year. Smartphone sales decreased by 32% Year on Year and 33% Quarter on quarter, while mobile phone sales (other than smart phones) witnessed a decline of 20% YoY and 25% QoQ. Gross margin for the devices and services segment declined to -4.5%, from 9.5% in Q2-2010. IPR Royalties were also included in the net sales under this segment, which contributed EUR 430 million.

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Devices & Services

– Device Sales: Effective April 1,2011, Devices & Services business includes two new operating and reportable segments – Smart Devices, which focuses on smartphones, and Mobile Phones, which focuses on mass market mobile devices – as well as Devices & Services Other. Device sales for Nokia were down 20% year-on-year and 18% sequentially, at 88.5 million units.

In terms of volumes, Smart phone sales have declined 34% YoY and 31% QoQ to 16.7 million units, in the quarter. Mobile phones/feature phone sales have declined 16% YoY and 15% QoQ to 71.8 million units.

Nokia’s market share in the Smartphone market has declined significantly, particularly in Europe and China. Nokia blames the intense competitive environment, component shortages and supply & logistics challenges for the YoY decrease in its sales. The sequential increase is due to the increased seasonal demand in the fourth quarter.

– Nokia’s overall Average Selling Price (including services revenue) increased to EUR 62 from EUR 61 in Q2-2010 , however, the ASP was EUR 65 in the previous quarter. ASP for Smart phones was EUR 142 and for feature phones was EUR 36.

– The Store (Yes Nokia now refers to the Ovi Store as just Store) is now registering more than 6.5 million downloads a day, compared with more than 5 million a day reported in Q1 2011, due to high traffic from new Symbian devices. The Store catalog now features more than 50,000 apps.

– The company launched photorealistic 3D models of certain metropolitan areas for the web version of Ovi Maps

– Nokia’s Map solutions company, NAVTEQ‘s net sales declined 3% YoY and increased 6% QoQ at EUR 245 million. Nokia announced plans to create a new Location & Commerce business which will combine NAVTEQ and Nokia’s social location services operations from Devices & Services. The Location & Commerce business will be an operating and reportable segment beginning October 1, 2011. In addition to a portfolio of products and services for the ‘wider internet ecosystem’, the Location & Commerce business will create integrated social location offerings for Nokia smartphones, including Nokia products with Windows Phone.

India Specific

– NAVTEQ expanded its presence in India with the opening of a second production center and the launch of NAVTEQ Natural Guidance for India.

Future Outlook

Nokia targets Nokia Group net cash and other liquid assets at the end of 2011 to be above the EUR 3.9 billion balance at the end of the second quarter 2011. Nokia says that due to limited visibility, it is providing a wider than normal range for its Devices & Services non-IFRS operating margin outlook for the third quarter 2011. Nokia expects its non-IFRS Devices & Services operating margin in the third quarter 2011 to be slightly above breakeven, ranging either above or below this level by approximately 2 percentage points.

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