Nokia’s Q3: The company shipped 108.5 million fones and lost $5.87 on each one; Finland bleeding

Nokia’s Q3 numbers are out and they’re bloody. This is the first quarter I can remember in a long time when the company did not post a profit. Update: This is Nokia’s first loss in a decade. They lost 426 million EUR ($636.57 million), compared to this time last year when they made 1.469 billion EUR ($2.2 billion). Net sales hit 9.81 billion EUR ($14.66 billion), which is 1% lower compared to Q2 2009 and 19.8% down from this time last year. The “Devices & Services” unit, the boys and girls who make mobile phones, made 785 million EUR in profit, which is up 2.9% from Q2 2009, but down 51.0% from this time last year. Nokia shipped 108.5 million mobile phones, down 8% from this time last year, but up 5% from Q2 2009. Of those 108.5 million devices, 16.4 million of them were what the industry likes to call “smartphones”. This is up from the 15.5 million smartphones Nokia sold in Q3 2008, but down compared to Q2 2009 when the company sold 16.9 million smartphones. Nokia estimates that their share of the smartphone market is now around 35%, which is exactly the same compared to Q3 2008, but down from the 41% they had in Q2 2009. Of those 16.4 million smartphones, 4.5 million of them were from the Nseries product family and 4.4 million from the Eseries (my favorite) family. This is down from the combined 9.3 million Nseries and Eseries volumes in Q2 2009. Nokia shipped 16.3% more devices to Europe this quarter compared to Q2 2009, but again fucked up in America, shipping 3.1% fewer units than the previous quarter. Average selling price of their mobile phones: 62 EUR ($92.65). Nokia maintained their 38% global market share.

The only thing that you can actually call good news is that Nokia updated their forecast for 2009 industry volumes. They predict that the total number of mobile fone shipments for the the industry will hit 1.21 billion, a 7% drop from 2008 figures, but better than the 10% drop they predicted earlier this year.

There is a conference call at 08:00 NYC time, which I’ll be live blogging in this very blog post.

14:58 Joined the call. Same old Nokia synth pop music. Just once I’d like to hear some Finnish songs. If you want to join the call yourself, just click the speaker icon on the far right.

15:00 We’ve switched to classical music.

15:01 1 minute late. By the way, did you know that the clocks go back an hour in only 10 days? I’m excited. Hip hip hooray for extra sleep.

15:02 Regina’s voice came on, she is our operator. It’s always her, I wonder if she is a robot or a real person …

15:03 Head of Investor Relations is reading the standard “the shit we say about the future is just a guess, we’re not wizards” clause.

15:04 December 2nd is Nokia Capital Markets Day in Helsinki, ooo, I would LOVE to go to this. Can anyone at Nokia hook this up?

15:05 CEO OPK: We had a very solid quarter in Q3, and by solid I mean something resembling strawberry flavored JELL-O. On October 1st we opened up the solutions unit, which we told you about last quarter. I’m going to repeat what I said 3 months ago, just so I can kill time from the Q&A portion because I know you assholes have some terribly harsh and critical comments to give me.

15:08 CEO OPK: The competition is coming on strong, and we’re not giving up at delivering devices that fail, repeatedly, to reach the bars our competitors set! The reason for this quarter’s fuck up was “component constraints”, meaning we couldn’t get our hands on some awesome technology that we hope would make you forget about our decade old software user experience. Regarding devices: 1.8 million Nokia N97s shipped. 5.7 million touch screen devices in Q3 shipped, 35% more than Q2 2009. In Q4 we will ship four more touch screen devices: N900, N97 Mini, X6, 5230. The Nokia E72 is now a Q4 product, even though we said it would be a Q3 product when it was announced.

15:14 CEO OPK: Ovi Mail reached 2 million user milestone. Took half the time to hit 2 million than it did to reach 1 million. Nokia Messaging has agreements with more than 25 operators. Music Store available in 22 countries, Comes with Music works in 12 countries.

15:17 CEO OPK: NSN services 160 million customers all around the world. They did lose market share this quarter however, we’re working on that. We still support them, no matter how much money they’re burning.

15:20 CFO Rick: Nokia ended the quarter with enough inventory to service 4 to 5 weeks of availability. Now I’m just going to read the numbers off the press release we published 3 hours ago. I’ll be sure to wake you up when I’m done.

15:29 CEO OPK: With regard to Ovi, we grew from 46 million to 61 million “active users”.

15:30 Q&A SESSION

15:31 Goldman Sachs: This component shortage, how exactly did that screw you over?

15:31 CEO OPK: The component constraints were due to component makers not making enough product. Everyone was hit in Q3, not just us. The component constraint hit our smartphone portfolio harder than our el cheapo fone lineup. “Don’t read between the lines” when we talk about component constraints. I’ll tell you how to do your job, because you always tell me how to do my job in your analyst reports.

15:35 Piper Jaffray: Do you think these new numbers are “the new normal”?

15:36 CFO Rick: I can’t tell whether or not what we’re experiencing is the new normal. Usually we have a huge jump in growth for the Q4 holiday season. You’re going to have to sit and wait until we publish those numbers.

15:38 RBC: I’m going to do it, I’m going to ask you about Android. I’m that douche bag with an M.B.A from Harvard. So, with that out of the way, are you going to ship a device with Android?

15:41 CEO OPK: No. Stop being a silly motherfucker. “There is so much in the pipeline” that we’ll blow your mind when you see what we’re working on, assuming we still have enough money to make mobile phones in a few years.

15:44 Credit Suisse: Yo Rick, will OPEX grow in Q4? Also, how large do you think the whole industry is now thanks to the gray market in Asia?

15:47 CFO Rick: We are totally upping OPEX in Q4, we need to get our asses into high gear for the holiday market. As for MediaTek, they make a lot of chips, sure, but it doesn’t mean that all the chips they make end up into consumer handsets. Do you have any idea how low their yields are?

15:50 Oppenheimer: Component shortages to impact your Q4 as well? How is your gross margin by the way?

15:51 CFO Rick: Our gross margin will improve in Q4, believe me, we’re working on that. We’re negotiating price changes with our suppliers, squeezing as many pennies out of them as we can.

15:54 CEO OPK: Our component shortage problem will impact our Q4 numbers as well.

15:55 UBS: You have a history of having issues bringing devices with integrated services onto the market, will you get better at that?

15:56 CEO OPK: Looking at where we are now, I feel that we have “a good grip” on the issue with service+device integration. Keep an eye on our future products.

15:59 Citi: The transition to solutions, how long do you think until that transition is complete and will it be “best in class”?

16:00 CEO OPK: We are evolving. You’ll see some of that evolution in Q4 2009 with the X6 that has Comes with Music, the N97 Mini, and more. We have new management here, new executives, 2010 we will evolve some more. “There are always things that you can do better.”

CALL DONE

  • Matti

    “The company shipped 108.5 million fones and lost $5.87 on each one”
    Did we check the same report? Devices unit made almost €800 million profit. Value of Nokia’s NSN shares was written down by almost a billion, which is where the losses come from.

    • Stefan Constantinescu

      The company as a whole lost money, the devices unit made money, you’re right, but investors don’t care. If the company didn’t post a profit, the company didn’t post a profit. It would be like me coming home to my mother during my secondary school days with an A+ in math, but a F in everything else.

      • Matti

        So you would tell your mom that you got F in math.

        • name

          if you do not know how to read financial statements pls do not do it and do not mislead readers

          I know you hate nokia but you do not need to make fool of yourself

          Nokia made 741 mln Euro (1,1 bln USD) on regular opratioons (like seling phones services etc)
          the minuses are comming from financial adjustions (listed below) and they have nothing to do with real cash:
          (after nokia web site)
          “Q3 2009 – EUR 1 167 million consisting of:

          – EUR 908 million impairment of goodwill in Nokia Siemens Networks

          – EUR 29 million restructuring charge and other one-time items in Nokia
          Siemens Networks

          – EUR 117 million of intangible assets amortization and other purchase
          price related items arising from the formation of Nokia Siemens
          Networks

          – EUR 111 million of intangible assets amortization and other purchase
          price related items arising from the acquisition of NAVTEQ

          – EUR 2 million of intangible assets amortization and other purchase
          price related items arising from the acquisition of OZ Communications
          in Devices & Services”

      • Mark

        No, Stefan, you’re wrong because your headline relates to handsets and the loss has nothing to do with the handset division and everything to with the write off of over a billion Euros in the Nokia Seimens Networks division.

        Sorry but since every analysts hasn’t actually equated the losses to handsets you’re out of line here. If you did a little research this would have been obvious but, unfortunately, too many bloggers lack the journalistic skills to do so.

        Best just to admit your blunder and move on, eh?

  • lux

    Good post but VERY bad chosen pic.

  • Not Saying

    Stefan, nice to see you’re still writing. I remember when you just packed up your stuff and moved to Finland with no plan. I thought you were crazy but it looks like it worked out for you.

    Nokia is full of very smart people, but there’s no doubt that they needed a wake up call, and I think that they’ve gotten it. I can tell you that most people in the company see exactly what the problems are and are working hard to turn things around.

    I don’t disagree with the previous comment about the iPhone. The first iPhone is light years ahead of devices like the N900. But that’s one demographic, people like you and me. People who have computers, a credit card, and can afford it. Then there’s the rest of the world to think about.

    The other thing to remember is that Apple plays by a completely different set of rules. They own the entire service solution and operators have nothing to say about it. For every other manufacturer, like Nokia, operators dictate what they can and cannot do and it effectively handcuffs Apple’s competition. This is true for phones subsidized by operators and the open market phones because Nokia depends on them for billing if they plan to sell any applications.

    The net is, this is a very good time to be Apple. All of there competitors are being held on the ground by operators while Apple beats the shiznit out of them in the services department.

    That said, I wouldn’t write Nokia off just yet.

    • ac

      “The first iPhone is light years ahead of devices like the N900.”

      What are you smoking? Maemo is by far the most advanced mobile operating system, the cpu speed is the same as the 3GS and the N900 screen has a higher resolution.

  • kevin

    Matti is correct. Your headline is misleading in that you are implying that their losses were attributable only to handsets and not to any other aspect of the business. You are either doing this because 1) you have a very simplistic view of business and accounting or 2) you just want a catchy headline.

    • Stefan Constantinescu

      Catchy headlines pay my bills Kevin :-)

  • Zak

    So, Stefan, did you get bored while at Nokia and left or did you get fired?
    I wonder what happened (privately)?
    You had so much enthusiasm to work for Nokia and what came out of it?
    Please write to me, I am not sharing since I got my lesson…

  • Chris P

    My God – people like you give people from the US a bad name. Must be depressing. Grow a brain.

  • pompey

    *cough* N86 *cough*

    *cough* 8 MPX *cough*

  • Mark

    I think it’s far more likely you’ll be prosecuted for crimes against the English language than Nokia going bankrupt.

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