July 19, 2012

Lumia Shines Bright In Dark Days Of Nokia Earnings

Enid Burns for redOrbit.com - Your Universe Online

Finland-based handset maker Nokia posted its earnings today, with a recorded 5 percent quarter-on-quarter decrease in net sales for the term ending in Q2, 2012. Two models in the Lumia line, which runs on the Microsoft Windows Phone operating system, show signs it's possible for Nokia to make a recovery after five consecutive quarters showing losses.

Lumia handsets, including the Lumia 900 and Lumia 610, sold 4 million units, posting in the Q2, 2102. An  Informationweek article notes that the Lumia devices were announced in Q1, and went on sale in Q2 this year, meaning that 4 million units sold in a three-month period. Also in the first two quarters of 2012, Symbian-based phones dropped in sales to 6.2 million, compared to 10 million in the previous period. Nokia announced in February that it would start making phones for the Windows Phone operating system and sales of the new phones quickly surpassed Nokia's Symbian phones.

Some question whether Nokia's move to the Windows Phone market is enough to revive the company. "The problem has to do with technology and brand. Nokia has built their brand name on ordinary wireless phones," says tech industry analyst Jeff Kagan. "However today's marketplace has moved beyond ordinary wireless phones. In fact it has moved beyond ordinary smartphones."

Kagan notes that Nokia was previously the number one handset manufacturer, and lead the industry over the past decade, "until Apple and Google changed the industry."

Breaking down the numbers, Nokia's net sales in Q2 were 7.5 billion Euros, approximately $9.2 billion. Losses for the company totaled $1.7 billion, bringing the company's total revenue for the quarter down 19 percent year-on-year, according to Computerworld calculations.

To meet its margins, Nokia has made several changes in strategy. In 2010 Nokia hired former Microsoft executive Stephen Elop as president and CEO. Nokia later made a commitment to produce handsets for Microsoft Windows Phone, when meant that support for Symbian handsets would dwindle. The company's most recent move to recover has been to cut 10,000 jobs this spring, bringing the total as high as 20,000 since Elop took over two years ago.

The mixed earnings reports gives some analysts reservations. "It's good to see Nokia is still hanging in there," said Riikka Tuominen, a credit analyst at Nordea Bank AB in Helsinki, in an article on Bloomberg Businesweek. "It's hard to write off the uncertainty."

Tuominen is not alone in his opinions. Nokia's recent moves toward recovery, including developing for Windows Phone, still needs some time to show whether it will be enough to save Nokia. "We hoped they would be able to update and enter the smartphone space. They failed," said Kagan. "We hoped their partnership with microsoft on the Lumia would help them restart their engines. It didn't."

Kagan ponders on what's next for Nokia? Will they be able to recover from a series of quarters posting losses? "We may be surprised and even shocked by what is next for this company unless they can pull up in time."