Nokia Posts Net Loss as Handset Sales Decline

Nokia Oyj (NOK1V), the Finnish mobile-phone maker that’s ceding market share to Apple Inc. (AAPL), reported its first quarterly loss in 1 1/2 years after handset sales slumped following an accord to shift to Microsoft Corp. software.

The second-quarter net loss was 368 million euros ($521 million), compared with a profit of 227 million euros a year earlier, the Espoo-Finland based company said today in a statement. Nokia had been predicted to report a net loss of 1.44 million euros, the average estimate of 16 analysts shows.

Nokia sold 88.5 million handsets in the quarter, 20 percent less than a year earlier and missing the 96 million-unit estimate by analysts. Chief Executive Officer Stephen Elop, who joined from Microsoft last September, is struggling to sell phones based on Nokia’s 10-year-old Symbian software that’s being phased out as the company prepares new models based on Microsoft’s Windows Phones.

Nokia climbed 5.3 percent to 4.30 euros at 1:38 p.m. in Helsinki trading. The company said today it's accelerating a plan to cut costs at the handset division, projecting a reduction of more than the initially forecast 1 billion euros in operating expenses by 2013.

Before today, the stock had fallen by about half this year. Nokia has a market value of 16.3 billion euros.
Nokia became the world’s biggest handset maker in 1998 and fell behind in smartphones after Apple introduced the iPhone in 2007. Apple sold 20.3 million iPhones in the quarter ended June 25, helping the company to more than double profit to $7.31 billion in the period. By revenue, Apple already surpassed Nokia in the first quarter as the largest maker of mobile phones.

Royalty Income

The hanset division was boosted by a 430 million-euro in royalty payments. As part of its settlements with Apple, Nokia will start receiving royalty revenues from the Cupertino, California-based company.
The market for smartphones, which have computer-like capabilities for running software and accessing websites, may grow 55 percent to 472 million phones this year, according to market researcher IDC. It expanded 87 percent last year on surging demand for cheaper models powered by Google Inc. (GOOG)’s Android software.

Nokia’s smartphones had an operating margin of 10.2 percent last year, compared with 17 percent for lower-priced feature phones that carry more limited options, according to historical figures released this week.
Nokia has revamped Symbian for touchscreens and released two handsets running an even newer version last quarter, including one combining a touchscreen and a Qwerty keyboard.

In June, Nokia unveiled the N9, a device running on its six-year-old Linux-based smartphone platform. The handset, designed by Marko Ahtisaari, the son of a former Finnish president, was presented as a demonstration of new hardware and features that will appear in other devices.

Symbian Software

Elop has said Nokia will continue selling Symbian devices and upgrading the software through 2016. He set a target in February of selling 150 million more Symbian handsets, without giving a deadline.
Rival Sony Ericsson Mobile Communications AB, which uses Android, reported its first loss in six quarters last week. Chief Executive Officer Bert Nordberg said the feature-phone market is “collapsing.” Feature phones accounted for about half of Nokia’s revenues and 78 percent of units shipped last year.
Android, which is used by dozens of handset vendors from Samsung Electronics Co. to small producers in China, passed Symbian as the most popular smartphone operating system in the first quarter, according to figures from Gartner Inc.

Nokia Siemens Networks, Nokia’s phone-equipment venture with Siemens AG, said last week it will remain under full ownership of its parents after buyout firms failed to come up with a compelling offer. The manufacturer is unprofitable as Chinese rivals such as Huawei Technologies Co. offer cheaper prices.