Saturday 20 January 2018

Nokia posts another loss ahead of smartphone launch

NOKIA reported another quarterly loss today and warned of more tough times ahead, raising the stakes for smartphone launches next month aimed at clawing back market share lost to Apple and Samsung.

Once the world's biggest mobile phone maker and a trail-blazer in the sector, the Finnish firm has fallen behind Apple's iPhone and Samsung's Galaxy phones in the lucrative smartphone market.

Today, it reported an underlying loss for the third quarter of €0.07 euros per share before one-off items, compared with a profit of €0.03 a year earlier.

This marked the third straight quarter of underlying losses but was better than the market's average forecast of a €0.11 loss, thanks to strong profits at its telecoms equipment venture Nokia Siemens Networks. However, pressure was still growing on Chief Executive Stephen Elop, who was hired in 2010 to turn the company around.

"The clock is ticking for him. We really need some success," said Juha Varis, Danske Capital's senior portfolio manager whose fund owns Nokia shares. "Listening to Elop's voice, it sounded like he feels the pressure."

Nokia is pinning its hopes on the new Lumia 820 and 920 models, which come in vivid colours, have high-resolution cameras and are due to hit the stores in November.

The phones run on new Windows Phone 8 software, part of Elop's strategy switch in February 2011 to scrap Nokia's own software in favour of Microsoft's.

Nokia shares briefly rose as much as 10 percent on the results but fell back later to be up 1.3 percent at 2.23 euros by 1510 GMT.

Jefferies analyst Lee Simpson warned investors were "in danger of buying a challenged product cycle", warning that the company could keep burning cash for another year.

Nokia has been cutting jobs, slashing spending in marketing and research, and selling assets such as its Vertu luxury handset unit to improve its finances. But a big drop in sales has been draining its cash reserves.

Its net cash fell to €3.6 billion from €4.2 billion in June, although it was higher than market forecasts.

Investors and analysts have said that if its cash position keeps worsening and Lumia sales fail to shine in the next few months, the company may need to change its strategy - as well as its leader.

In the third quarter, sales of the existing range of Lumia smartphones fell to 2.9 million from 4 million in the second quarter. Average selling prices dropped to 160 euros from 186 euros per phone.

Sales of mid-range feature phones rose from the previous quarter, helped by the new Asha models, but Nokia's long-term survival is seen as 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.

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