Nokia makes €576m loss ahead of Windows Phone 8 launch

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Smartphone sales down 37 per cent in third quarter as manufacturer warns of a challenging final three months of the year in this sector of its business  

Nokia has posted a loss of €576m (£467.5m) in the third quarter of this year, just weeks ahead of the release of its first two handsets to run off the Windows Phone 8 OS, the Lumia 820 and 920.

The loss was however an improvement on the €826m (£710.9m) loss reported in the previous quarter but still largely higher than the loss of €71m (£57.6m) made in the same quarter last year.

The manufacturer did make a non-IFRS profit of €78m (£63.3m) in Q3 compared to the €327m (£265.4m) loss made in the previous quarter but still down from the €252m (£204.5m) non-IFRS profit made in Q3 2011.

Sales for the quarter were €7.24bn (£5.88bn), down four per cent sequentially and 19 per cent year-on-year. Operating margin was -8 per cent compared to the -11 per cent posted in Q2 and -0.8 per cent from Q3 2011.

Sales in Europe stood at €985m (£800m), down 10 per cent sequentially and 29 per cent year-on-year respectively.

Within its devices and services division, Nokia reported a quarterly loss of €683m (£554.4m), up from the €474m (£384.8m) loss made in the previous quarter and the €168m profit made in the same period last year.

Sales in this division were €3.56bn (£2.89bn), down 11 per cent sequentially and 34 per cent year-on-year. The average selling price (ASP) fell 10 per cent from the previous quarter to €43 (£35).

Smartphone sales were down 37 per cent from the previous quarter and 56 per cent from Q3 2011 to stand at €976m (£792m). Nokia shipped 6.3m smartphones in the quarter, down 38 per cent sequentially and 63 per cent year-on-year. The ASP rose three per cent sequentially to €155 (£126) and increased 18 per cent year-on-year.

The manufacturer did however see a rise in feature phone sales, up three per cent from Q2 to €2.37bn (£1.92bn). However, this was down 19 per cent from a year ago. Shipments were up four per cent to 76.6m but down 15 per cent from a year earlier. The ASP remained steady at €31, but was down three per cent from Q3 2011.

Shipments in Europe were up 10 per cent sequentially to 16.8m units but were down 19 per cent from the same period last year.

Nokia warned that Q4 will be a challenging quarter for its smartphone division, “with lower-than-normal benefit from seasonality in volumes, primarily due to product transitions and our ramp-up plan for our new devices”.

Nokia CEO Stephen Elop (pictured) said: “As we expected, Q3 was a difficult quarter in our Devices and Services business; however, we are pleased that we shifted Nokia Group to operating profitability on a non-IFRS basis.

“In Q3, we continued to manage through a transitional quarter for our smart devices business as we shared the exciting innovation ahead with our new line of Lumia products.

“In our mobile phone business, the positive response to our new Asha full touch smartphones translated into strong sales. And in Q3, our mobile phone business delivered a solid quarter with sequential sales growth and improved contribution margin.

“While we continue to focus on transitioning Nokia, we are determined to carefully manage our financial resources, improve our competitiveness, return our Devices and Services business to positive operating cash flow as quickly as possible, and ultimately provide more value to our shareholders.”

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