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Summary:

Nokia sold 5.6 million Lumia smartphones in the first quarter of this year, up from 4.4 million in the previous quarter. Its shareholders are still losing money – but less than expected.

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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  1. In the U.S. Nokia needs to re-examine their marketing program, after a couple years of playing carrier-ball with “exclusives” they are still stumbling to gain any traction.
    They need to consider a path to market direct to the end user again. Maybe a online store similar to the Google Play, Devices, Nexus strategy.

  2. Asha are not smartphones and Nokia doesn’t include them in Smart Devices, so the way you put it becomes a mess.
    Smartphones were 6.1 mil units , 5.6+0.5 vs 6.6 in Q4 (4.4WP).and this is where ASP was 191euros
    Asha down from 9.3 mil units in Q4 to 5 mil units in Q1 and with more cheap Lumias hitting the market Asha will drop further.
    Dumbphones down from 79.6 to 55.8 but if you exclude Asha it’s down from 70.3 to 50.8 so almost 28% seq decline in units.
    As for op margins in devices the outlook is similar to what they provided for q1 ,so they don’t actually guide down and it’s normal with a much lower ASP expected in Q2.
    they do have a device hitting Verizon soon and looks like more new devices in the summer so they might have a decent year. If they don’t have new smartphones in the summer they lose momentum and it only gets harder to stay relevant.

    1. The Asha devices are not in the smart devices segment, correct, but Nokia itself calls them smartphones in its results. That may be tactical, but I think it makes sense: those full-touch Asha phones are direct competitors to the low-end Androids in emerging markets.

      1. It’s”creative” IR ( to be kind) and the competition is only on price.If it made sense for Asha o be smartphones they couldn’t make them without breaching the M$ contract,.
        And the point was that by including Asha in smartphones and then talking about Smart Devices ASP ,the reader might think Asha is part of the ASP math.Plus it’s just wrong to propagate the deceiving idea that Asha are smartphones.

      2. Was this in the call? I looked at the statement on the US site and it lists them correctly.

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