Nokia profits dive as new phones slow to take off

Wednesday, 1 February 2012 00:01 - - {{hitsCtrl.values.hits}}

Reuters: Nokia Oyj reported a 73 per cent fall in fourth-quarter earnings as sales of its new Windows Phones failed to dent the dominance of Apple Inc’s iPhone or compensate for diving sales of its own old smartphones.

The world’s largest cellphone maker by volume last February unveiled a major strategy shift to Microsoft Corp software for its smartphones in an attempt to challenge Apple and Google Inc’s Android.

But Apple’s phones in particular have proved far more popular.

Apple reported earlier this week sales of 37 million iPhones for the December quarter. Nokia has sold over 1 million Windows Phones since its launch in mid-November.

“It is more than some were expecting, but it’s not going to worry Apple or Google,” said analyst Nick Dillon from research firm Ovum.

Nokia said it expects its phone business’ underlying earnings to be around breakeven in the first quarter, well below analysts’ forecasts, with sales falling more than usual in the seasonally weaker quarter.

“The report highlights that the start of the Windows strategy is slow, and we have very little concrete data to predict its success at this point,” said analyst Michael Schroder from FIM Securities.

“There are a lot of uncertainties. These are critical times for the future of the whole company. The next months will be extremely important”.

Ben Wood, head of research at mobile consultancy CCS Insight, compared Nokia to a late starter in a marathon, saying it needs to move fast.

“The reality is that it’s going to have to be an exceptionally fast marathon if it wants narrow the gap with its rivals,” he said.

Nokia’s fourth-quarter core earnings per share of 0.06 euro were better than the market’s expectation for 0.04 euro.

The results were boosted by a $250 million payment from Microsoft as part of the Windows Phone sales deal.

Microsoft has tried to enter the mobile industry for more than ten years, but with little success.

Its market share is 1-2 percent. Canalys analyst Pete Cunningham said Microsoft’s deal with Nokia was make or break for its ambitions in this sector. “Nokia gives Microsoft a chance to enter the big stage. If they cannot make it work, arguably this is the end of the road,” he said.

Shares in the Nokia were up 1.6 percent to 4.12 euros at 1347 GMT, regaining some ground lost over the past week following poor results from its suppliers.

Nokia proposed a 0.20 euro-per-share dividend for 2011, slightly more than expected.

The board put forward Risto Siilasmaa as its next chairman to replace long-time leader, Jorma Ollila, who is due to step down in May.

“Siilasmaa will provide continuity given his four years on the board but he must ensure a clean break from past mistakes as Nokia undertakes its most critical transformation to date,” said CCS Insight’s Wood.

Siilasmaa, a 45-year old entrepreneur, has been a Nokia board member since 2008 and is known in Finland as the founder of software security company F-Secure, but has a low profile outside the country. Nokia’s quarterly net loss totalled 1.1 billion euros, or 0.29 euros per share, due to a 1.1 billion euro writedown for its digital mapping assets.