More negative numbers for Nokia today, as the company reported its quarterly earnings for Q2, but it also noted sales of 7.4 million Window Phone-powered Lumia devices getting sold — the most in any quarter yet. Nokia said net sales for the company were $7.5 billion (€5.7 billion), with a non-IFRS earnings per share of $0.00 and a reported EPS of -$0.08. That’s a mixed result: Analysts were expecting a loss per share of $0.03, on revenues of $8.63 billion ($6.59 billion). The company’s operating loss of €115 million ($150 million) is significantly less than last year’s operating loss of €824 million ($1.1 billion).
As a point of comparison, the company last quarter reported 5.6 million Lumia devices sold, with sales of $7.6 billion and a non-IFRS loss per share of $0.03 (and a reported EPS of $0.09).
The net sales reported today are 24% down on the same quarter a year ago, and the fact that the company is reporting a cut in operating loss with better EPS points to the fact that improvements are coming not because of growth, but because the company continues to be in a cost-cutting mode (or, it is getting more efficient, depending on how you look at it). As a measure of that it is also continuing to cut jobs as well — with a round of 440 cuts being slipped into today’s earnings as part of that.
The company continues to pursue a two-level model where devices are concerned.
On one hand, it is looking to attract smartphone newbies who may have previously been still been using feature phones, or who are less inclined to pay premium prices. For these it is rolling out more lower-end smartphones and high-end feature phones for those spending less money in emerging and developed markets.
On the other, it’s trying to keep its reputation as a leader in the field by pushing boundaries on new features, such as the 41 megapixel camera that it unveiled in the Lumia 1020 last week.
In both regards, this quarter was not brilliant for either segment. In smart devices, Nokia’s sales by volume were down by 27% over a year ago, while its “mobile phones” segment (its term for the rest of the portfolio) was also down by 27% to 53.7 million units. In value terms, sales of smart devices were down 24% to $1.5 billion (€1.1 billion) compared to last year, while mobile devices were down 39% to $1.8 billion (€1.4 billion).
Throughout this, Nokia has yet to reach a tipping point in which either smartphone sales by value or volume are outweighing those of cheaper, lower end devices. And, the decline in smart devices overall shows that although Nokia’s newer Lumia brand and strategic direction continue to pick up steam, it still is not offsetting the left-behind Symbian platform.
In other words, while fighting off competition from dozens of handset makers making low-end devices, and despite innovations like the Lumia 1020, Nokia is still struggling to catapult itself to the top of the league of leaders in the new generation of devices, against the likes of Samsung making Android devices and Apple and its iPhone.
A hint in the earnings statement appears to point to Nokia believing that next quarter (Q3) will be a turnaround in that regard. “During the third quarter, we expect that our new Lumia products will drive a significant part of our Smart Devices revenue,” CEO Stephen Elop notes in a statement. The big question will be whether that Smart Devices revenue will be enough to keep losses at bay.
Location, NSN. In the rest of the earnings, sales in its location unit Here are down on a year ago as well. Sales came in at $305 million (€233 million), down 18% over last year, up 8% on the previous quarter. It remains loss-making, with a $116 million operating deficit, which is at least marginally better than the $120 million a year ago. But still points to how some of the big services stories that Nokia is pushing are not yet bearing black fruit.
But now that Nokia is full owner of Nokia Siemens Networks, it will be able to better consolidate some of those benefits on its balance sheet. While that division actually posted lower revenues compared to last year and last quarter — $3.6 billion, down 17% and 1% respectively — it is at the moment the only division of the company posting an operating profit, at a modest $10 million.