Nokia results: treading water for now, but Lumia sales are up

Nokia CEO Stephen Elop

It’s still hard to tell how much Nokia’s fortunes have turned around. Following a surprise return to profitability around the end of last year, the Finnish handset maker’s latest interim quarterly report show a continuation of underlying profitability – but its shareholders are still losing money.

The company’s devices and services division managed to eke out a profit of €4 million ($5.2 million) in the first quarter of 2013, if you ignore “special items” during the quarter (namely, a €72 million restructuring charge, a €27 million boost from a cartel claim settlement and a €1 million hit associated with the purchases of Novarra, MetaCarta and Motally). That’s up from a €126 million loss in the same quarter of 2012, based on the same non-IFRS terms.

However, earnings per share were still -€0.02 for the quarter. That’s a loss of $0.03 per share, slightly better than analysts’ predictions of a $0.05 per-share loss, and significantly better than the $0.10 per-share loss in Q1 2012.

But let’s look at handset sales.

Nokia sold 11.1 million smartphones in the quarter — that’s 5.6 million Lumias (up from 4.4 million in the previous quarter), 0.5 million Symbian smartphones (down from 2.2 million in the previous quarter) and 5 million Series 40-based Asha full-touch devices (down from 9.3 million in Q4 2012, which is probably a combination of seasonality and the rise of cheap Androids in the emerging markets). Nokia CEO Stephen Elop noted in an earnings call that two-thirds of the Lumia sales in Q1 2013 were running Windows Phone 8 while the rest of Lumia sales were phones that run older Windows Phone software.

The average selling price of a Nokia “smart device” is up 34 percent year-on-year, from €143 to €191. This has helped the devices and services division hit underlying profitability for the second quarter in a row – overall, the group has now been profitable for an extra quarter on top of that.

Here’s what Elop said in a statement:

“At the highest level, we are pleased that Nokia Group achieved underlying operating profitability for the third quarter in a row. While operating in a highly competitive environment, Nokia is executing our strategy with urgency and managing our costs very well.”

For the second quarter of this year, Nokia predicted a slight worsening of its devices and services operating margin from -1.5 percent to -2 percent, citing the reason as “competitive industry dynamics continuing to negatively affect the Mobile Phones and Smart Devices business units”.

In short, the turnaround remains far from complete, and Nokia still has to prove itself with the Lumia range. Perhaps the large-screen Lumia smartphone rumored by the FT on Wednesday might help. I imagine the lower-priced Lumias announced in February will also provide a boost.

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