Nokia continues to report losses in quarter ended 31st December 2011. The company reported net sales of EUR 10 billion for the quarter, down 21% year-on-year but up 11% sequentially, and its operating losses were at EUR 954 million in contrast to operating profits of EUR 884 million, that it registered in Q4-2010.
Nokia CEO, Stephen Elop said that the company was pleased with the performance of its mobile phones business, which benefited in Q4 from sequential double-digit percentage growth in its dual SIM business, with particular strength in India, Middle East and Africa and South East Asia.
– In October, it introduced the Asha 200, 201, 300 and 303, which brought new mobile phones into 76 markets across the world.
– Nokia introduced Lumia to consumers in Europe, Hong Kong, India, Russia, Singapore, South Korea and Taiwan.
– The company claims to have sold 1 million Nokia Lumia devices till date (Not clear if the date was 26th Jan 2012 or the quarter ending) .
The devices and services segment business of handset major Nokia contributed EUR 5.9 billion to net sales for the quarter ending December 31st 2011, down 29% year-on-year but up 11% sequentially. The segment reported operating profits of EUR 203 million compared to operating profits of EUR 1.08 billion that the company reported in the same quarter, last year.
Smartphone sales decreased by 38% Year on Year and 25% Quarter on quarter, while mobile phone sales (other than smart phones) witnessed a decline of 23% YoY and an increase of 4% QoQ. Gross margin(Non IFRS) for the devices and services segment declined to 25.8%, from 29% in Q4-2010.
Payment from Microsoft: Nokia received the first quarterly platform support payment of USD 250 million (EUR 180 million) from Microsoft. 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 are expected to measure in the billions of US Dollars.
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 8% year-on-year and up 6% sequentially, at 113.5 million units.
In terms of volumes, Smart phone sales have declined 31% YoY and increased 17% QoQ to 19.6 million units, in the quarter. Mobile phones/feature phone sales have decreased 1% YoY and increased 5% QoQ to 93.9 million units.
Nokia’s market share in the Smartphone market has declined significantly, leading to the decline in over all net sales. Nokia said that the decline was driven primarily by the Symbian related allowances- It said : “Following the announcement of our strategic partnership with Microsoft in February 2011, our strategy included the expectation to sell approximately 150 million more Symbian devices in the years to come. However, changing market conditions are putting increased pressure on Symbian. In certain markets, there has been an acceleration of the anticipated trend towards lower-priced smartphones with specifications that are different from Symbian’s traditional strengths, which has contributed to a faster decline of our Symbian volumes than we anticipated. We expect this trend to continue in 2012. To maximize the value of the Symbian asset going forward, we expect to continue shipping Symbian devices in specific regions and distribution channels, as well as to continue to provide software support to our Symbian customers through 2016. As a result of the changing market conditions, combined with our increased focus on Lumia, we now believe we will sell fewer Symbian devices than previously anticipated. ” In the fourth quarter 2011, Nokia recognized allowances for excess component inventory and future purchase commitments related to Symbian greater price erosion than cost erosion, and the negative impact from foreign currency hedging, which partially offset the positive impact from the lower deferral of revenue related to services sold in combination with our devices and lower fixed manufacturing costs.
– Nokia’s overall Average Selling Price (including services revenue) decreased to EUR 53 from EUR 69 in Q4-2010 , however, the ASP was EUR 51 in the previous quarter. ASP for Smart phones was EUR 140 and for feature phones was EUR 32.
– As announced, Nokia started reporting the new Location & Commerce business which combines NAVTEQ and Nokia’s social location services operations from Devices & Services. In addition to a portfolio of products and services for the ‘wider internet ecosystem’, the Location & Commerce business intends to create integrated social location offerings for Nokia smartphones, including Nokia products with Windows Phone. The segment reported net sales of EUR 306 million a 15% YoY increase and 9% sequential increase.
Nokia expects its non-IFRS Devices & Services operating margin in the first quarter 2012 to be break-even ranging either above or below by approximately 2 percentage points.