Nokia continues to struggle with Windows Phone

Nokia posted yet another brutal quarter, reporting a $754 million operating loss on $9.49 billion in sales. Smartphone sales were down 63 percent from the same period last year to a mere 6.3 million units, and the Finnish manufacturer posted a quarterly net loss of $1.27 billion.

To me, the most striking thing about Nokia’s latest quarter is the disappointing sales of its Lumia line of smartphones. It sold only 2.9 million Lumia handsets, down from 4 million the previous quarter, resulting in a backlog of Lumia inventory to the tune of $157 million, as my colleague Robert Andrews noted. Meanwhile, sales of feature phones were actually up 4 percent, and the line of Asha devices — low-end handsets running the ancient Series 40 and targeted at emerging markets such as India — more than doubled Lumia sales.

It’s clear now (as if it weren’t before) that Nokia’s huge pivot to Microsoft’s Windows Phone was premature: Rather than investing so heavily in the North American and Western European markets, the company should have increased its focus on emerging markets and its existing Series 40 and Symbian platforms as it gradually stepped up its business in the West.

And while Windows Phone 8 is set to make its debut in advance of the upcoming holiday season, there isn’t a lot of reason for optimism in Espoo — at least not in the short-term. WPCentral.com reported yesterday that AT&T’s exclusivity with the Lumia 920 — a deal that is inexplicable from Nokia’s standpoint — will last six months, which is an eternity in the smartphone world. And Lumia’s once-intimate relationship with Windows Phone will grow less cozy as HTC and other manufacturers move toward the platform.

Nokia still has plenty of money to plug ahead for a while — $4.72 billion in net cash, to be precise — and Windows Phone is likely to grow substantially in the coming months. It’s far from clear, though, whether Nokia can share in that growth.