Blog Post

Nokia on the ropes as it posts $692M loss

Boxing, CC licensed from Flickr user Claudio GennariNokia(s nok) has taken a battering over the last year or so — but even though it’s trying to compose itself and switch to Windows Phone(s msft), the punches keep on raining down.

Announcing its second quarter results today, the Finnish handset maker said that from April to June it posted a loss of €487 million — or $692 million — on revenues of €9.275 billion ($13.2 billion). Not only does that send the company crashing into the red, but it also means sales are down 11 percent on the previous quarter, and down 8 percent, or more than a billion dollars, from the same time last year.

Chief executive Stephen Elop suggested that Nokia was doing the right thing to turn around its ailing business, making the no pain, no gain argument.

“While our Q2 results were clearly disappointing, we are executing well on the initiatives that are the most important to our longer term competitiveness,” he said in a statement. “Some progress is already evident… we firmly believe that our deliberate and unwavering commitment to making the changes necessary at Nokia is the right way to deal with the disruptive forces in our industry.”

He’s right: the numbers look bad, but anyone would point out that this is a tough time to be almost anyone in technology — anyone aside from Apple(s aapl), that is — and that nearly every consumer electronics company and big technology corporation is finding the going tough. It’s a fair point: the recession is still biting in many parts of the world, in fact perhaps deeper now in many ways than over the last couple of years. Consumer spending is still down, starving businesses of much-needed cash, and many companies that have braved it through the last couple of years are now stumbling. Nokia, for all its troubles, is not alone.

But even in that context, Nokia’s difficulties look less like a stumble and more like it is slamming into the canvas.

After all, back in May, the company set the market murmuring nervously when it said that sales of handsets and services were going to be lower than expected — down from its previous estimate of €6.1 and €6.6 billion (that’s $8.7 to $9.4 billion).

Given that warning, Wall Street had expected overall revenues of $13.04 billion for this quarter. Instead, it fell short of even that mark.

Things are particularly tough for the Devices & Services division, which counts for most of Nokia’s business, and nearly all of its profit. This time last year, the unit announced Q2 revenues of over €6.8 billion ($9.6 billion), resulting in income of €647 million ($920 million). Back then, those numbers were poor enough to put then-chief executive Olli-Pekka Kallasvuo under intense pressure.

Today, it announced net sales of €5.4 billion and an operating loss of €247 million: significantly worse.

Admittedly, Nokia knows it’s trying to perform a difficult balancing act. The promise of a high-end touchscreen handset running Windows is getting closer all the time — but until then, the company is stuck between a rock and a hard place.

Showing off swanky new models may give die-hard fans a fillip, but it will discourage them from buying a new Nokia phone in the meantime. More casual purchasers, meanwhile, will continue buying at a rate dictated by their bank balances rather than Nokia’s own marketing push, meaning that Windows Phone could have possibly less impact when it finally arrives than the business hopes.

With the first “Sea Ray” phone sporting Windows not due to arrive until the end of this year, the company’s prediction for the next quarter was unsurprisingly weak. Due to what it called “limited visibility” it suggested that the Devices & Services division would run at or around breakeven, with other unit remaining pretty much static.

Can Elop keep the ship afloat until then?

Photograph used under Creative Commons license courtesy of Flickr user Claudio Gennari

7 Responses to “Nokia on the ropes as it posts $692M loss”

  1. Ex-Nokia Fan

    A Company makes losses and the whole world is loosing confidence in it. And in the quarterly results, the company decides to totally ignore the only piece of real good news that can instill confidence on its capabilities. May be it never happened in Corporate history. What a strange fate to hit a great company like Nokia. ( I am talking of N9). I wish no phone ever takes birth with the kind of bad luck that N9 had!

  2. The company is in the middle of a turn-a-round, decline was built into the market price this quarter, in fact Nokia showed better than expected. Granted they have their work cut out, but WP7 is innovative and shows promise, if Microsoft can effectively market it. Maybe Windows8 will be the visual catalyst that brings WP7 into view, with its release sooner than latter.

  3. “…posted a loss of €487 million — or $692 million — on revenues of €9.275 billion ($13.2 billion)”

    “Given that warning, Wall Street had expected overall revenues of $13.04 billion for this quarter. Instead, it fell short of even that mark.”


  4. Jon Martin

    Look, we don’t know if Windows phones will be a hit but the ship is hardly sinking. Nokia is still a tremendously wealthy company and could go for a lot longer than six months making this kind of loss. Will they ever regain 40% smartphone share? No, almost certainly not. But hardware-wise they know what they’re doing and software-wise Microsoft know what they’re doing. They should manage to sell some phones next year and will almost certainly return to profitability unless they screw up in a huge way…again.

    • I don’t think you know the meaning of the word “sinking”. Sinking means going down, descending, falling in a direction opposite to up, etc

      Nokia has been sinking for quite a while. They ard now sinking even more. They don’t even sell as many smartphones as Apple does now (16 million vs. Apple’s 20 million in the last quarter)

      That is the definition of sinking, whether you want to believe it or not.

      Elop made an elementary mistake with his Burning Platform memo. He basically forced Nokia to jump into the frigid North Atlantic instead of looking for a lifeboat.

      Consider what Steve Jobs did with Apple. Apple was sinking too with an aging an dilapidated OS. What did he do? He showed the lifeboat first by showing what the next generation OS would like like.

      Unlike Elop, however, he didn’t make Apple and its users jump into the waters before the lifeboat was ready.

      Instead, he very publically RECOMMITTED resources to the old MacOS. He announced to the world that the MacOS was still the best thing out there and added more than a hundred engineers to keep the MacOS going for as long as possible. The result was MacOS 9, which improved upon MacOS 8 and 7 enough to keep users and sales afloat until the OS X lifeboat was ready to launch.

      Contrast this with Elop who abandoned Symbian as quickly as possible and told everyone else to jump ship too. Except the Windows Phone 7 lifeboat isn’t ready and now everyone, from users to developers, have nowhere to go except onto the welcoming of passing ships called iOS and Android.

      Fatal error. Nokia could have kept the Symbian ship afloat long enough despite all the leaks and holes, if he only didn’t set fire to it himself and burned it down. He listened to Nokia’s enemies instead to rallying the crew to keep fighting. It’s like a WWII carrier captain who orders his men to abandon ship in the middke od a battle because the ship got hit by a torpedo, instead of getting the damage control teams out to patch the damage and keep the ship in the fight.

      Instead, Nokia is in the water, sinking while waiting for the shi names Windows 7 Phone in the horizon to pick them up.