Nokia on the ropes as it posts $692M loss

Boxing, CC licensed from Flickr user Claudio Gennari

Boxing, CC licensed from Flickr user Claudio GennariNokia has taken a battering over the last year or so — but even though it’s trying to compose itself and switch to Windows Phone, 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, 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

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