Nokia sees handset volume and profitability decline, though NSN offers positive point

Nokia reported a continued weak performance for its devices business, with Stephen Elop, the company’s CEO describing its third quarter as “difficult”. However, the Nokia Siemens Networks (NSN) joint venture provided something of a positive, with the executive describing this unit’s performance during the period as “remarkable”.

During the period, Nokia shipped 82.9 million handsets in total, down 22 per cent year-on-year from 106.6 million. It saw volumes decreasing in both its Smart Devices unit and its mass-market Mobile Phones unit.

On a group level, it announced a net loss for the quarter of €943 million (US$1.24 billion), compared with a €151 million loss in Q311, on revenue of €7.24 billion, down 19 per cent from €8.98 billion.

The Devices & Services unit saw an operating loss of €683 million, compared with a prior-year profit of €168 million, on sales of €3.56 billion, down 34 per cent from €5.39 billion.

Within this, Smart Devices volumes fell by 63 per cent year-on-year to 6.3 million units from 16.8 million, with revenue falling by 56 per cent to €976 million from €2.19 billion.

Less than half of those units – 2.9 million, or 46 per cent – were from its Windows Phone-powered Lumia range. As had previously been suggested, the company noted that it had seen “lower operator and distributor demand for Lumia” in North America, as it prepares to launch its first smartphones powered by Windows Phone 8. It also noted “lower volumes of our Symbian and Lumia products” in Europe from the prior quarter.

And in its mass-market Mobile Phones unit, volumes fell by 15 per cent year-on-year to 76.6 million from 89.8 million units, with sales down 19 per cent to €2.37 billion. Its average selling price fell year-on-year due to increased volumes of lower-priced devices, although it has stabilised quarter-on-quarter, following the launch of its full-touch Asha devices (which are now being referred to as “smartphones”).

Contrastingly, NSN saw an operating profit of €182 million, compared with a prior-year loss of €114 million, on net sales which increased by three per cent to €3.5 billion.

It was said that this was due to “higher sales of infrastructure equipment and slightly higher sales of services, partially offset by a decline in sales of business areas not consistent with NSN’s strategic focus”.

Nokia’s outlook for the fourth quarter is fairly bleak, with its Devices & Services operating margin expected to be “approximately negative six per cent, plus or minus four percentage points”. It noted that competitive industry dynamics are continuing to negatively affect both its Smart Devices and Mobile Phones unit, and increased expenses in Devices & Services related to new launches, partially offset by cost reductions.