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Nokia Sales Hit 13-Year Low as Phone Demand Falls Short

April 18, 2013

Nokia Sales Hit 13-Year Low as Phone Demand Misses Estimates

Sales of the flagship Lumias running Microsoft Corp.’s Windows software rose to 5.6 million units from 4.4 million in the fourth quarter as Nokia added versions. Photographer: Simon Dawson/Bloomberg

Nokia Oyj (NOK1V), the Finnish mobile-phone maker seeking a comeback, reported its smallest quarterly revenue in 13 years as handset demand waned, missing analysts’ estimates and sending its stock down 8.3 percent.

First-quarter sales fell 20 percent to 5.85 billion euros ($7.6 billion), Espoo, Finland-based Nokia said today. Analysts projected 6.52 billion euros, the average of estimates compiled by Bloomberg. Mobile-phone volumes slumped 25 percent.

Competition from Asian manufacturers building phones that run Google Inc.’s Android software is hurting demand for Nokia’s basic handsets. The sales miss leaves Chief Executive Officer Stephen Elop’s recovery effort in doubt, as nascent demand for Nokia’s Lumia smartphones isn’t enough to offset plummeting demand for the company’s cheaper models.

“The lower-end mobile-phone business is not doing well,” Mikko Ervasti, an analyst at Evli Bank Oyj in Helsinki, said in a phone interview. “They need to start pushing their Microsoft- based Lumias into cheaper prices to gain traction in emerging markets.”

Nokia fell to 2.42 euros at the close in Helsinki. The stock tumbled 22 percent last year, its fifth straight annual drop, and has lost 17 percent this year.

The revenue was the smallest since the third quarter of 1999, when Nokia was still a more diverse company with business lines including computer monitors. Its focus on mobile phones pushed quarterly revenue to a record 15.7 billion euros in 2007, after which competition from Apple Inc. (AAPL:US) led to sliding sales.

‘Aggressive Moves’

Sales of the flagship Lumias running Microsoft Corp. (MSFT:US)’s Windows software rose to 5.6 million units from 4.4 million in the fourth quarter as Nokia added versions. Apple and Samsung Electronics Co.’s quarterly smartphone sales exceed 100 million units combined.

Nokia sold a total of 61.9 million mobile devices during the three months. Analysts on average predicted 73 million units, including 5.7 million Lumias.

“The decline in our mobile phones business was primarily due to some competitive industry dynamics,” Elop said on a call with reporters. Nokia is preparing “aggressive moves” to respond, he said.

The company plans more competitive pricing, while new products such as the Asha 310 with smartphone-like functions and the ultra-affordable Nokia 105 should help sales, Elop said.

U.S. Device

Nokia is also preparing to introduce new smartphones, Elop said, a category in which the company is seeking to break the dominance of Apple’s iPhone and Samsung’s Galaxy devices. A major U.S. wireless carrier is expected to introduce a Nokia device “in the month immediately ahead,” Elop said.

Once the world’s largest smartphone maker, Nokia had more than 50 percent of the market before Apple’s iPhone and Google’s Android were introduced about six years ago. Nokia has lost about 90 percent of its market value since then and fallen outside the top-five smartphone makers.

In the last three months of 2012, Cupertino, California- based Apple sold 47.8 million iPhones and South Korea’s Samsung, the biggest maker of Android devices, sold 62 million smartphones.

Elop, who joined from Microsoft, started betting on his former employer’s operating system after Nokia’s homegrown Symbian software fell out of favor among consumers.

Reducing Costs

Revenue at Nokia’s handset business slumped 32 percent to 2.89 billion euros. Operating profit at the unit, excluding some items, was 0.1 percent of sales. The company had predicted a margin of between negative 6 percent and positive 2 percent.

This quarter, that margin will be negative 2 percent, plus or minus 4 percentage points, Nokia predicted. Evli’s Ervasti predicts a margin of 0.7 percent.

To reduce costs, Elop has cut more than 20,000 jobs and closed production and research sites since taking over in 2010. For the last three months of 2012, the company posted its first profit in seven quarters.

The first-quarter net loss narrowed to 272 million euros, or 7 cents a share, from 928 million euros, 25 cents, a year earlier.

Nokia Siemens Networks, the company’s equipment joint venture with Siemens AG (SIE), posted a first-quarter operating profit of 196 million euros, excluding some items, as sales fell 5 percent to 2.8 billion euros.

Nokia’s net cash increased to 4.5 billion euros from 4.4 billion euros at the end of December. Nokia’s debt is at junk status with the three main rating companies. In January, Nokia scrapped its dividend for the first time in at least 143 years to bolster its liquidity position.

To contact the reporter on this story: Adam Ewing in Stockholm at aewing5@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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