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Nokia Q2-2012 Concall: On Windows Phone 8, Location Services & Lumia Devices

Nokia reported operating losses of EUR 826 million and net sales of EUR 7.5 billion for the quarter ending June 30, 2012, a 19% decline year-on-year and 3% growth sequentially. Here are some notes from the Nokia’s Investor conference call:

On Nokia’s Transition Period: Nokia CEO, Stephen Elop said that the company was taking action to manage through this transition period, and while Q2 was a difficult quarter, Nokia employees were demonstrating their determination to strengthen its competitiveness, improve its operating model and carefully manage financial resources. The company ended the quarter with net cash and other liquid assets at EUR 4.2 billion, down from EUR 4.9 billion in the previous quarter and gross cash at EUR 9.4 billion, down from EUR 9.8 billion in the previous quarter.

Selling Non-core assets: Elop said that the company continues to look for opportunities to sell its non-core assets. Last month, Nokia had sold Vertu to EQT VI, an investment fund of a Northern Europe based private equity group, keeping a 10% stake in the company.

On Updates to Existing Lumia devices: While the existing Lumia range of devices will not get Windows Phone 8 update, Elop said that users can expect updates and new capabilities not only up until Windows Phone 8 launch but even after Windows Phone 8 ships. This includes some of the features from Windows Phone 8 like the redesigned start screen. The company hope to deliver a similar experience across the platform and various price points. He also pointed out that more than 60% of Android devices are currently shipping with three versions older than the current Android version and most of them are not upgradeable to the newest version of Android operating system, but are still being bought by consumers.

On Products for Low End Markets: Elop said that Nokia intends to launch products at lower price points but expectedly refused to reveal any specific products and its announcement dates. He noted that Nokia recently launched full touch devices in its Asha series and claimed that these phones provide smartphone-like features including Internet access, social networking and a variety of other capabilities like Nokia’s proxy browser at lower price points, thereby reducing the total cost of ownership for those devices.

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He also said that Nokia plans to position Windows Phone devices in these low-cost markets as devices which offers a superior experience in various categories including social networking sites and offer access to locally popular social environments. Elop said that they are currently looking at possibilities to bring Windows 8 to low cost devices and users can expect elements of both Windows Phone 7 and Windows Phone 8 in the forthcoming devices.

– Inventory Write-off: Nokia mentioned a EUR 220 million Inventory allowance in the Smart Devices category. Although it did not specify the exact share of Lumia, Symbian and MeeGo phones but noted that it was in order of Lumia, followed by Symbian and MeeGo devices, in the same order of priority.

-On higher gross margins on Lumia: Elop said that although Nokia plans to aggressively price its smartphones, it intends to take the gross margins higher on the long run. He said that with the next two waves of Lumia devices, the company will be pushing up in price point and gross margin driven by differentiation and unique capabilities in its offerings. Elop claimed that Nokia was restricted by the current Windows Phone version (Windows Phone 7.5) and adopted standard chassis and the standard capabilities in its current Lumia smartphones, since Nokia already late to the previous software product time cycle when it signed the deal with Microsoft.

– On Location Based Services: Elop stated that Nokia investing in location services because they believe that mobile phones will be a critical part of collecting real time data through sensors and it hopes to redefine mapping and location-based services just as Google redefined search and Facebook redefined social media. The company claimed that that 4 out of 5 cars with on-dashboard navigation use Nokia technology at present. Nokia has also partnered Yahoo, Flickr, and Bing for its location based platform and it plans to announce more such partners in the coming weeks and months.

On Shorter Smartphone Cycle Times: Elop stated that they are currently observing accelerated cycle times in the industry where companies are developing smartphones looking for opportunities to reduce the price by the slightest. However, Nokia plans to develop premium devices which will have longer cycle times, and with every subsequent premium or flagship device release, they might take the previous one to a lower price point.

On Microsoft Partnership: Elop said that Nokia has established a preferred position both at the partnership level and contractually. He claimed that Nokia also has clear rights and capabilities within the partnership to maintain this preferred position. He also added that Nokia currently has the ability to guide what software and hardware they are building on the Windows phone platform as well as other platforms like their Mobile Phones platform and their location-based assets.

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RelatedNokia Q2-2012: Net Loss At EUR 826M; Overall Handset Sales Down 26% YoY

By Apurva Chaudhary and Vikas SN

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