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Summary:

It may be the height of summer in Finland, but the view from Nokia chief Stephen Elop’s office window must look pretty dismal right now. Things just keep getting worse for the beleaguered handset maker, which has just announced that it lost $1 billion over the […]

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It may be the height of summer in Finland, but the view from Nokia chief Stephen Elop’s office window must look pretty dismal right now. Things just keep getting worse for the beleaguered handset maker, which has just announced that it lost $1 billion over the last three months.

Announcing its financials for the second quarter of 2012 on Thursday, Nokia said it lost €826 million ($1 billion) on sales of more than $9 billion.

Coming after a first quarter that had the industry recoiling in terror, the company’s plan to get its struggling business back on track looks as distant as it ever has.

Here are the headline figures from the results:

    Net sales were €7.5 billion ($9.2 billion), up slightly on the previous quarter
    But actual mobile sales were down five percent on the same time last year
    The mobile devices unit was responsible for €474 million in losses, more than half of the total

There were few surprises in the results, which analysts had estimated pretty accurately. The company’s total volume of Windows Phone handsets reached 4 million — as predicted — and most other figures were in line with expectations. That was partly due to an update issued by the company in June, but even that did not manage to stop shares sliding. They are now at their lowest point for 20 years.

The grim reality is that the rot seems to be pretty much everywhere, with all of the major business units (mobile, location and Nokia Siemens Networks) losing cash and mobile sales or revenue falling in every region where the business operates. And there are costs all over the business too: restructuring and job losses are cutting deep, and even an asset like Navteq was responsible for €126 million in writedowns and depreciation.

The only real bonus — if you can call anything that relates to a $1 billion deficit a bonus — is that the company is not losing quite as much money as it did in Q1. But then compare it to this time last year when losses were $692 million, and you realize that’s little comfort.

From the leadership, the story was the same as it’s been for a while: it’s a difficult time, this ship will take time to turn around, the market’s challenging but stick with us.

Observe Elop, from the announcement:

“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 […] 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.”

And here’s what he said last quarter:

“We are navigating through a significant company transition in an industry environment that continues to evolve and shift quickly. Over the last year we have made progress on our new strategy, but we have faced greater than expected competitive challenges.

“[…] We have a clear sense of urgency to move our strategy forward even faster …We are confident in our strategy and focused on responding urgently in the short term and creating value for our shareholders in the long term.”

Elop’s clear on one thing: it’s not going to get better any time soon, and the expectation for Q3 is not good. The question, surely, is whether he can maintain leadership and convince the company it’s on the right path while all the evidence points in the other direction.

  1. S. Kyle Davis Thursday, July 19, 2012

    Wow. What a shortsighted article. Way to completely overlook the fact that smartphone sales are actually up at Nokia. It’s just their low end phone business that is suffering, as the market overall is shifting to smartphones. Nokia is shifting with it, but it will probably take a year or more. The big question will be if they can retain enough capital to make it without those MS bailouts becoming a buyout.

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  2. Seriously shortsighted. Did anyone really expect NOK to have a better quarter than they did? They are in the midst of a massive reorientation. This takes time and a lot of effort. In fact, I would argue that NOK performed slightly better than expected…and the market seems to agree so far. NOK is up 9.25% at 9:50 EDT.

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  3. Are you on glue? Who predicted 4 million in Lumia sales? Every “prediction” I’ve read has targeted 2-3 million max.

    You are indeed missing the big picture here. Nokia’s restructuring is WORKING and public opinion on Windows Phone is steadily improving.

    It’s cool if you’re an Apple troll, just be more upfront about it such as not to confuse your readers.

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    1. Please offer some evidence that Nokia’s restructuring is working.

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    2. Bobbie Johnson Thursday, July 19, 2012

      @evster88 I have yet to see any serious evidence to back up your statements to suggest that the restructuring is working, or that the corner has been turned for Windows Phone. If there is evidence, I’d love to see it: and if it is the case I am more than happy to revisit my position.

      NB I’m not saying every analyst prediction was spot on, but overall they worked out pretty much in line with expectations. And for every fillip, there was a flop: the losses (for example) were significantly higher than the consensus.

      And to @kyle and @jd – I am not being shortsighted, I’m being realistic. At some point Nokia has to turn these numbers around, because it can’t float on its cash pile forever. By these figures it’s got, what?, two years max until every last penny has gone. A few more quarters like this and the position becomes untenable.

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  4. There was an interesting article in the Journal today – about how Nokia’s research and design people had prototyped a smartphone with a touch interface and had some preliminary designs around a tablet too. Apparently, they merged the low end phone division with the smart phone division to combat the RAZR threat and the profitable low end phone folks cancelled the prototype. Not sure if the old Nokia folks are trying to cover up their strategic blunders. But it was funny to read Paul Jacob’s (from QCOM) comment about how it took 6-9 months for Nokia to mull over an idea or a proposal. Very funny!

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    1. Bobbie Johnson Thursday, July 19, 2012

      Good point Ram. It’s been a big problem for Nokia — and a source of much regret inside and out — that it hasn’t been able to capitalize on its R&D expertise. I remember visiting Espoo a couple of times and seeing some really great stuff in the labs that never made it to prime time. It is interesting to imagine what would have happened had they shipped.

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  5. The advance of technology waits for no one. In the last few years the smartphone revolution has taken down three formerly great tech companies: Nokia, RIM, and HP. All of them didn’t just drop the ball, they let it roll completely off the field and disappear.

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