Nokia’s posts smaller loss but Lumia sales stall

Nokia reported smaller-than-expected losses for the third quarter but warned of tough times ahead.

Nokia's posts smaller loss but Lumia sales stall

While the results, boosted by strong profits at its telecoms equipment venture Nokia Siemens Networks, were above forecasts, investors said pressure was still on CEO Stephen Elop, who was hired in 2010 to turn the company around.

“I think Nokia will continue to have a rough ride,” said Inge Heydorn, fund manager at Sentat Asset Management.

The company’s net sales were down 19% to €7.2bn and it posted net of losses €969 million for the quarter.

I think Nokia will continue to have a rough ride

Nokia is now pinning its hopes on the new Lumia 820 and 920 models, which have high-resolution cameras and run on Microsoft’s latest software. The new Lumias are due to hit the stores in November.

Sales of the existing range of Lumia smartphones fell to 2.9 million from four million in the second quarter as consumers waited for the newer models. Average selling prices dropped to €160 from €186 per phone.

Sales of mid-range feature phones rose from the previous quarter, helped by the new Asha range, but Nokia’s long-term survival is seen as more dependent on higher-margin smartphones.

“Feature phones are a sunset technology and smartphones are sun rising, so they need to transfer growth to the sun rising technology,” said Neil Mawston, analyst at Strategy Analytics.

Pre-holiday battle

Nokia said the fourth quarter would be challenging as it starts to roll out the Lumia 820 and 920 with more marketing than on earlier Lumia models.

The pre-holiday shopping season is seen as crucial for mobile phone makers, and the new Lumias will face strong competition from Apple’s new iPhone 5 and Samsung’s Galaxy SIII.

The new Lumias will also be competing with a whole range of new tablets this Christmas, including Apple’s new mini iPad which is expected to be launched next week.

“Lofty market expectations for Q4 ignore the reality that new products will ship halfway through the quarter into an overwhelmingly competitive and congested market,” said CCS Insight analyst Geoff Blaber.

Burning through cash

Net cash came in at €3.6 billion ($4.7 billion), ahead of market forecasts of €3.4 billion. But that was still down from €4.2 billion in June.

Investors and analysts have said that if its cash position worsens and Lumia sales provide little bounce over the coming months, the company may need to change its strategy – as well as its chief executive.

Nokia has cut spending and is selling assets such as its Vertu luxury handset unit to improve its finances. It is also considering selling and leasing back its waterfront headquarters in Espoo, a short drive from Helsinki.

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