Nokia returns to profit but sales keep dropping (Update)

January 24, 2013 by Matti Huuhtanen
In this April 12, 2012, file photo, the window of Nokia's flagship store displays an advertisement of the new Nokia Lumia mobile phone in Helsinki on Thursday, April, 19, 2012 . Nokia Corp. reported a fourth-quarter net profit of €202 million ($270 million) Thursday Jan. 23, 2013 compared to a net loss of more than $1 billion a year earlier but revenue in the period fell 20 percent to €8 billion from a year earlier. (AP Photo/LEHTIKUVA / Markku Ulander, File)

Struggling Nokia Corp. turned a fourth-quarter net profit of €202 million ($270 million) compared with a loss of $1 billion a year earlier, but revenue fell 20 percent as it failed to make gains in the fiercely competitive smartphone market.

The Finnish company said Thursday that revenue dropped to €8 billion ($10.6 billion) from €10 billion as smartphone sales plunged 55 percent, and it gave a grim outlook, saying it would not pay a dividend for 2012 to save money.

Although the company swung into profit after a spell of six consecutive quarterly losses, markets were not convinced. Its share price plunged, closing down more than 5 percent at €3.30 on the Helsinki Stock Exchange.

Nokia said it sold 15.9 million smartphones in the period, down from 19.6 million a year earlier, including 4.4 million flagship Lumia phones. In comparison, rival Apple Inc. sold almost 48 million iPhones.

The former No. 1 cellphone maker said it expects operating margins in the first quarter to be "approximately negative 2 percent, plus or minus four percentage points," citing increased competition and lower-than-expected demand for its Lumia handsets and cheaper Asha models, which have been popular in emerging markets.

The news of the dividend and sales figures came almost two weeks after Nokia had pre-released some results and announced that its handset business had returned an underlying profit.

Neil Mawston, a technology expert from Strategy Analytics in Boston, said Nokia's global smartphone market share had fallen to a record low of about 3 percent.

"Nokia is on a recovery curve at the moment," Mawston said. "In terms of volumes, they really need to improve. They regained profit, the next step is to regain market share."

The company saw a backslide in the world's largest devices market, China, where it sold only 4.6 million handsets in the quarter —a drop of some 70 percent from a year earlier with sales revenue there plunging almost 80 percent.

Nokia, formerly the world's top cellphone maker, had hoped to stem the decline in smartphones through a partnership with technology giant Microsoft Corp. in 2011 in a major shift of strategy, with Windows Phone software becoming the main platform for its smartphones.

But the firm's performance in North America—the frontline of the smartphone market—continued to be a disappointment. Shipments there grew 40 percent on the year, but to a mere 700,000 devices.

In all, Nokia sold 45 million cellphones in the fourth quarter, 15 percent fewer than in 2011.

CEO Stephen Elop said he was encouraged that the company had reached "underlying profitability" and strengthened its financial position but cautioned that more cutbacks could be expected.

"We remain focused on moving through our transition, which includes continuing to improve our product competitiveness, accelerate the way we operate and manage our costs effectively," Elop said.

Nokia CFO Timo Ihamuotila conceded that the company had not been able to meet demand for its top range Lumia phones at the end of the last year caused by a shortage of components, and it remained unclear if those problems would persist.

A positive note in Nokia's report was the performance of its network operations, Nokia Siemens Networks, a joint-venture with Germany's Siemens AG. It had been lossmaking for years, but now showed signs of improvement, mainly because of restructuring measures including substantial job cuts.

Elop said the division "drove record profitability" during the quarter, with operating profit surging to €251 million from €67 million the previous year as revenue grew 5 percent to €4 billion.

Nokia, which has been struggling to cut costs by €1.6 billion by the end of this year, announced 10,000 job cuts in June and closed down research and development facilities globally as well as its main manufacturing plant in Salo, Finland—the company's last assembly plant in Europe.

At the end of 2012, Nokia employed a total of 98,000 people—down from 130,000 a year earlier.

Explore further: Nokia loss tempered by Windows phone launch


Related Stories

Nokia loss tempered by Windows phone launch

January 26, 2012

Mobile phone maker Nokia Corp. on Thursday posted a fourth-quarter net loss of euro1.07 billion ($1.38 billion) as sales slumped 21 percent even as the company's first Windows smartphones hit markets in Europe and Asia.

Nokia losses pile up as sales plunge (Update 3)

October 18, 2012

(AP)—Nokia Corp. reported Thursday that its third quarter net loss widened further to €969 million ($1.27 billion) with a 19 percent plunge in revenue, as it struggles against the dominance of Samsung and the iPhone in ...

Nokia posts $1.2 billion Q1 loss as sales plunge

April 19, 2012

(AP) -- Struggling cellphone maker Nokia Corp. blamed tougher-than-expected competition, particularly in the smartphone market, for a huge (EURO)929 million ($1.2 billion) net loss in the first three months of the year.

Recommended for you

WhatsApp vulnerable to snooping: report

January 13, 2017

The Facebook-owned mobile messaging service WhatsApp is vulnerable to interception, the Guardian newspaper reported on Friday, sparking concern over an app advertised as putting an emphasis on privacy.

US gov't accuses Fiat Chrysler of cheating on emissions

January 12, 2017

The U.S. government accused Fiat Chrysler on Thursday of failing to disclose software in some of its pickups and SUVs with diesel engines that allows them to emit more pollution than allowed under the Clean Air Act.


Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.