Nokia continues to report losses in quarter ended 31st March 2012. The company reported net sales of EUR 7.3 billion for the quarter, down 29% year-on-year and 26% sequentially, and its operating losses were at EUR 1.34 billion in contrast to operating profits of EUR 439 million, that it registered in Q1-2011.
Nokia CEO, Stephen Elop said that the company was navigating through a significant transition in an industry environment that continues to evolve and shift quickly. Over the last year it made progress on its new strategy, but has faced ‘greater than expected’ competitive challenges. Nokia launched four Lumia devices (Windows Phone) ahead of schedule but Elop says that actual sales results have been mixed. The company exceeded expectations in markets including the United States, but establishing momentum in certain markets including the UK was more challenging.
Product Highlights:
– Nokia is expanding the Lumia platform with the launch of the Lumia 900 at the higher and Lumia 610 at the lower price point.
– Nokia plans to renew its feature phone portfolio with 7 new Asha products
– Nokia announced the Nokia 808 PureView, the first smartphone to feature Nokia PureView
imaging technologies, bringing together high resolution sensors, exclusive Carl Zeiss optics and Nokiadeveloped algorithms, which will support new high-end imaging experiences for future Nokia products. The device is expected to ship during the second quarter 2012.
– Nokia’s Location & Commerce unit updated Nokia Maps and Nokia Drive for Nokia’s Lumia smartphones twice. With these updates, Nokia Maps now also features a real-time traffic view in selected markets and enables the creation and collection of favorite places as well as route sharing via SMS, email or social networks, while Nokia Drive is now supporting a full offline experience from route calculation to navigation and rerouting. Nokia Drive also features a new dashboard that includes speed limit alerts and provides options between estimated time of arrival, time to destination and distance to destination.
– Location & Commerce unit launched NAVTEQ Traffic™ in India, making the real-time traffic service available to
more than 26 million people in Delhi and Mumbai.
– It launched Nokia Transport, a mobile application for Nokia’s Lumia smartphones
providing underground, tram, suburban train and bus directions for more than 500 cities in 46 countries.
– Introduced walk navigation (beta) for its HTML5 based mobile web offering on
m.maps.nokia.com that lets people use Nokia Maps on non-Nokia devices running Android and iOS.
– Location & Commerce launched a new shared map design with Bing Maps, jointly developed with
Microsoft.
The devices and services segment business of handset major Nokia contributed EUR 4.2 billion to net sales for the quarter ending March 31st 2012, down 40% year-on-year and 29% sequentially. The segment reported operating losses of EUR 219 million compared to operating profits of EUR 729 million that the company reported in the same quarter, last year.
Smartphone sales decreased by 52% Year on Year and 38% Quarter on quarter, while mobile phone sales (other than smart phones) witnessed a decline of 32% YoY and 24% QoQ. Gross margin(Non IFRS) for the devices and services segment declined to 24.4%, from 28.8% in Q1-2011.
Payment from Microsoft: Nokia received the second quarterly platform support payment of USD 250 million (EUR 189 million) from Microsoft. Interestingly this is the same amount that it received in the first tranche. 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. Nokia has said that the total amount of the platform support payments is expected to slightly exceed the total amount of the minimum software royalty commitments.
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 24% year-on-year and 27% sequentially, at 82.7 million units.
In terms of volumes, Smart phone sales have declined 51% YoY and increased 39% QoQ to 11.9 million units, in the quarter. Mobile phones/feature phone sales have decreased 16% YoY and 25% QoQ to 70.8 million units.
Nokia’s market share in the Smartphone market has declined significantly. It said that the year-on-year decline in Smart Devices net sales in the first quarter 2012 was primarily due to significantly lower Symbian volumes. On a sequential basis, the decline in Smart Devices net sales in the first quarter 2012 was also due to lower Symbian volumes, partially offset by growing sales of Nokia Lumia devices.
Feature phone sales also declined. According to Nokia, on a year-on-year basis, the decline in Mobile Phones volumes in the first quarter 2012 was primarily driven by its reduced portfolio of higher priced feature phones compared to the first quarter 2011, partially offset by sales of recently introduced products which represented a higher proportion of our portfolio.
On a sequential basis, the decline in Mobile Phones volumes in the first quarter 2012 was primarily driven by lower seasonal demand for its feature phones and aggressive price competition, especially in entry-level feature phones, from more affordable smartphones and competitors with broader portfolios of feature phones with more smartphone-like experiences, such as full touch devices. This decline, Nokia said, was most pronounced in India and Europe.
– Nokia’s overall Average Selling Price (including services revenue) decreased to EUR 51 from EUR 65 in Q1-2011 , however, the ASP was EUR 53 in the previous quarter. ASP for Smart phones was EUR 143 and for feature phones was EUR 33.
– 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 277 million a 19% YoY increase and 9% sequential decrease.
Future Outlook
Nokia expects its non-IFRS Devices & Services operating margin in the second quarter 2012 to be similar or below the first quarter 2012 level 0f -3%.
