If Nokia was able to say at the end of Q2 that Lumia had finally overtaken Blackberry in smartphone sales then it was the only good news in a set of figures that shows the Finnish giant is sliding again as competition across the market cuts into its crucial handset sales.
If fact, that competition was so keen that sales of handsets fell by 27% to leave Nokia with an overall decline in sales of 24% to US$ 7.5 billion over the quarter.
Nokia again missed analysts estimates, but then it’s been a week of that for the big tech stocks so no one was really surprised.
While other tech stocks have fallen on the back of poor global economic conditions, Nokia has had to deal with that along with globally poor consumer sentiment, coupled with an ongoing inability to make any real in-roads into a smartphone market dominated by Apple and Google.
Even if Lumia sales rose to 7.4 million units in the quarter, it is hard to see where Nokia will find any joy. Including this quarter, it has now lost US$ 6.5 billion in 9 straight negative quarters with analysts now wondering how much longer this can go on.
However, the losses in this quarter did narrow to just under US$ 300m from US$ 1.8m in the same quarter a year ago, which means some kind of progress was made.
The problem is that sales of both handsets and smartphones fell by 27% with handsets down to 53.7 million units. Translated into cash terms, this means that sales of smartphones were down to US$ 1.5 billion, while mobile handsets were down to US$ 1.8 billion.
Lumia did perform well at 7.8 million units on the back of a number of new releases, but compared to the figures being reported by Samsung or Google at 100 million units, or the 37.4 million Apple units that were sold in the quarter to the end of last March, it's not a lot to shout about.
None of this has been good for the company, which has had to cut 20,000 jobs and close production and research facilities, with a further 440 jobs to go in the future.
Nokia must focus on “improving the competitiveness and innovation of our products while we manage our costs and keep moving with urgency,” Stephen Elop told analysts on a conference call. This could be translated as “we need to sell more mobile handsets to make this work.”
Nokia, NSN, Microsoft, Huawei
He obviously didn’t say that, but there is another elephant in the room here that will have to be dealt with sooner or later and Nokia’s decision to buy Siemens' 50% share of broadband network, Nokia Siemens Network (NSN), has only made the matter more pressing.
You may recall in June that Microsoft reportedly walked away from talks with Nokia about buying the Nokia mobile business because of Nokia’s failure to make ground in the mobile market.
We also noted that while Microsoft may have not been interested at that point, Huawei was still a contender. The situation hasn’t changed much since then other than Steve Ballmer’s insistence this week during Microsoft’s earnings call that it had to do better in the device market.
Nothing definite there, but it still makes Microsoft a possible buyer for an unruly mobile business that needs to be knocked-into shape — the kind of shape that Microsoft envisages its new, restructured device unit will provide. And Huawei still hasn’t said anything new.
All of this has led to speculation that Nokia is looking at changing its strategy completely. This would make sense as without NSN, Nokia really is struggling and even Lumia is not going to help.
Of course this is only speculation, gossip and rumor and Nokia has ruled-out any change in strategy. Speaking to analysts yesterday, Elope denied any shift in strategy and said that NSN would be strengthened as an independent entity. He also said that Nokia would be “keeping its options broadly open” in how that plays out.
Whether that strategy remains the same will depend on whether Nokia can do anything with its mobile business over the coming year. In the meantime, let’s see where the next quarter figures leave Nokia in both the mobile and smartphone market, and where it goes from there.
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