The much awaited earnings (not really) of Nokia in the second quarter of 2012 have been released, and they are disappointing. Nokia has reported an operating loss of more than $1 billion, with revenues dropping to just $9.3 billion, down nearly 20% year-over-year.
Net sales have been down across the board, with both smartphones and mobile sales showing a decline.
It sold nearly 4 million Lumia units worldwide in Q2 2012, which is in line with consensus estimates, but much lower than its competitors on Android. Even the feature phone unit volumes increased marginally to 73 million units, but Nokia hardly makes much profit on those.
It ended the quarter with nearly $5.2 billion in net cash.
Stephen Elop, Nokia’s CEO, said:
“Nokia is taking action to manage through this transition period. While Q2 was a difficult quarter, Nokia employees are demonstrating their determination to strengthen our competitiveness, improve our operating model and carefully manage our financial resources.
We shipped four million Lumia Smartphones in Q2, and we plan to provide updates to current Lumia products over time, well beyond the launch of Windows Phone 8. We believe the Windows Phone 8 launch will be an important catalyst for Lumia. During the quarter, we demonstrated stability in our feature phone business, and enhanced our competitiveness with the introduction of our first full touch Asha devices. In Location & Commerce, our business with auto-industry customers continued to grow, and we made good progress establishing our location-based platform with businesses like Yahoo!, Flickr, and Bing. We continued to strengthen our patent portfolio and filed more patents in the first half of 2012 than any previous six month period since 2007. And, we are encouraged that Nokia Siemens Networks returned to underlying operating profitability through strong execution of its focused strategy.”
At the rate Nokia is incurring operating losses, it seems like Microsoft’s cash infusions are the only thing keeping it alive.
It needs to figure out a way to make money off its Windows Phone powered Lumia devices or face oblivion. At this point, the latter seems more likely.
While it remains a leader in mobile shipments, it needs to focus on becoming a leader in the smartphone space, which offers much higher margins.
Maybe it should shift to a multi-platform strategy, and hedge its bets on Windows phone by building devices powered by Android too. After all, if Microsoft isn’t exclusive to Nokia, why should it be exclusive to Microsoft’s platform?