Nokia set for more cuts, as Q1 disappoints – Mobile World Live

Nokia set for more cuts, as Q1 disappoints

19 APR 2012

Nokia announced its anticipated poor results for the first quarter of 2012, with president and CEO Stephen Elop stating that the company has a “clear sense of urgency to move our strategy forward even faster.”

In a statement, Nokia said that it “plans to accelerate and substantially deepen Devices & Services cost savings,” with details to be announced “as quickly as possible.”

Among its strategic aims are actions to drive take-up of its Microsoft-powered Lumia smartphones, and support for its feature phone sales.

While Nokia has previously trumpeted the rapid introduction of its Lumia devices, Elop acknowledged that “the actual sales results have been mixed.” Although markets including the US exceeded expectations, “establishing momentum in certain markets including the UK has been more challenging.”

The company’s mass-market mobile phones business is also pressured, as “the lower price tiers of our industry are undergoing a structural change, and traditional feature phones are challenged by full touch devices.” Elop said Nokia is making new investments in this space, with plans to strengthen its line-up during the current quarter.

On a group level, the company reported a loss attributable to equity holders of EUR929 million, compared to a prior-year profit of EUR344 million, on total sales of EUR7.4 billion, down 29 percent from EUR10.4 billion. On an operating level, it saw a loss of EUR1.3 billion, compared with a Q1 2011 profit of 439 million.

Sales in the Devices & Services business fell by 40 percent to EUR4.2 billion, with collapsing figures for both its Smart Devices (down 52 percent to EUR1.7 billion) and Mobile Phones (down 32 percent to EUR2.3 billion). Operating loss for this unit was EUR219 million, compared with a prior-year profit of EUR729 million.

Total device volume of 82.7 million units was down by 24 percent from 108.5 million in Q1 last year, again with both Smart Devices (down 51 percent to 11.9 million) and Mobile Phones (down 16 percent to 70.8 million) underperforming.

Geographically, the company saw a drop in sales for Devices & Services across the board, with sales in Greater China decreasing by 70 percent to EUR577 million from EUR1.9 billion. Other notable drops included a 35 percent fall in Europe, to EUR1.35 billion from EUR2.08 billion – both China and Europe have previously been strongholds for Nokia.

The Nokia Siemens Networks infrastructure joint venture is also continuing to see tough times amid a wide-ranging restructure, with Nokia reporting an operating loss of EUR1 billion for this unit, compared with a prior-year loss of EUR142 million, on sales of EUR2.9 billion, down 7 percent from EUR3.2 billion.

During Q1, NSN’s restructuring led to a charge of EUR772 million.

In terms of positive, the Location & Commerce unit saw an operating profit of EUR36 million, compared with a prior-year loss of EUR16 million, on sales of EUR277 million, up 19 percent.

Nokia is also set to restructure its sales operation, following the departure of Colin Giles, EVP of sales and a member of its Leadership Team. In a statement, it said that “after many years of travel, Giles has decided to leave the company to be closer to his family.”

Following his departure, four regional SVPs and the lead of sales operations will report directly to Niklas Savander, EVP of Markets. “As a result of reducing layers, we can increase the speed at which we execute sales activities and improve  the collaboration between our business groups and our team on the ground,” he said.

Looking forward, Nokia reiterated that it expects its non-IFRS Devices & Services operating margin in the second quarter of 2012 to be “similar to or below” the first quarter level of -3 percent. This reflects the fact that Q1 saw a one-off benefit related to lower warranty costs, as well as ongoing concern related to competitive industry dynamics; uncertainty with regard to new product rollouts; and macroeconomic conditions.

During the first quarter of 2012, Nokia received around EUR189 million in “platform support payments” from Microsoft.

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Steve Costello

Steve works across all of Mobile World Live’s channels and played a lead role in the launch and ongoing success of our apps and devices services. He has been a journalist...More

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