Nokia have just reported their Q2 2012 earnings this morning, and the results paint a mixed picture for the troubled handset maker. Nokia posted an overall net operating loss of roughly $1 billion, though the company actually gained about $125 million in cash in the quarter thanks to large licensing royalties and cash infusions from Microsoft.
The big story here is in the company’s Lumia sales. Sales of Nokia’s Windows Phone devices doubled to 4 million units in Q2, though that figure represents worldwide sales. In the ever-important North American market, Nokia only managed to push 600,000 Lumia devices, suggesting continued struggles for Nokia and Microsoft as the companies look to build the Windows Phone platform. The 600,000 sales number matches that of Q1 2012, and flat growth rates are never good for a company with active plans to take back market share in the US.
Nokia’s financial troubles are largely due to the transition period it finds itself in. While phone sales overall edged up for the quarter (from 83.7 to 82.7 million), smartphone sales fell from 16.7 million in Q1 to 10.2 million in Q2. And, yes, that does mean that Nokia continues to sell more Symbian devices (6.2m) than Windows Phone devices (4.0m), though we expect that number will change when Windows Phone 8 makes its debut in Q4. As Q3 2012 will still see a company in transition, Nokia has warned that its financial report for Q3 will likely resemble that of the past two quarters, and that Q4 should start to see a turnaround for the company.
CEO Stephen Elop issued the following statement on the earnings report. It’s fairly lengthy, though give a good glimpse of both the current and future state of the company.
“Nokia is taking action to manage through this transition period. While Q2 was a difficult quarter, Nokia employees are demonstrating their determination to strengthen our competitiveness, improve our operating model and carefully manage our financial resources.
We shipped four million Lumia Smartphones in Q2, and we plan to provide updates to current Lumia products over time, well beyond the launch of Windows Phone 8. We believe the Windows Phone 8 launch will be an important catalyst for Lumia. During the quarter, we demonstrated stability in our feature phone business, and enhanced our competitiveness with the introduction of our first full touch Asha devices. In Location & Commerce, our business with auto-industry customers continued to grow, and we made good progress establishing our location-based platform with businesses like Yahoo!, Flickr, and Bing. We continued to strengthen our patent portfolio and filed more patents in the first half of 2012 than any previous six month period since 2007. And, we are encouraged that Nokia Siemens Networks returned to underlying operating profitability through strong execution of its focused strategy.
We are executing with urgency on our restructuring program. We are disposing of non-core assets like Vertu. We are taking the necessary steps to restructure the operations of the company, which included the announcement of a new program on June 14. Faster than anticipated, we have already negotiated the closure of the Ulm, Germany R&D site, and the negotiations about the planned closure of our factory in Salo, Finland are proceeding in a collaborative spirit.
We held our net cash resources at a steady level after adjusting for the annual dividend payment to our shareholders. While Q3 will remain difficult, it is a critical priority to return our Devices & Services business to positive operating cash flow as quickly as possible.” - Stephen Elop, CEO, Nokia
The full press release can be found at Nokia’s Results site. The next few quarters will be a true test of the long-term viability of Nokia and Windows Phone as they attempt to become the emergent third smartphone ecosystem.
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