Nokia announced mixed results for the third quarter of 2013, a period which Timo Ihamuotila, CFO and interim president, described as “among the most transformative in our company’s history”.
Nokia has inked a deal to sell its handset business to Microsoft, and has bought out partner Siemens from the NSN joint venture, which will now form the core of its operations going forward.
But the results show that without the burden of its Devices & Services unit, it will not be plain sailing for Nokia, with sales slowing at NSN and in its Here location-based service unit.
“Our strategy work is making good progress and it has already become clear that there are meaningful opportunities for all of our business areas: NSN, Here and Advanced Technologies. In all of these businesses, we have strong assets that we continue to invest in for the long term benefit of our customers and shareholders,” Risto Siilasmaa (pictured), chairman and interim CEO, said.
Starting with its handset unit, Nokia said that volumes of its Lumia smartphones increased by 19 per cent quarter-on-quarter to 8.8 million units, which it said reflects its “recently broadened Lumia product range and strong customer demand, particularly for the Lumia 520”.
Mobile Phone volumes increased 4 per cent over the prior sequential quarter to 55.8 million devices, “demonstrating solid performance across the majority of our portfolio due to recently launched devices, particularly the Nokia 105, Asha 501, and Nokia 210”.
For the quarter to the end of September, the Devices & Services unit saw an operating loss of €86 million, compared with a loss of €672 million in the prior-year period, on sales of €2.9 billion, down 19 per cent from €3.56 billion.
Perhaps more encouragingly, sales increased by 6 per cent quarter-on-quarter, driven by an improved performance by both its smartphones and mass-market devices sequentially.
Smart Device sales were €1.25 billion, up 28 per cent year-on-year, with the 8.8 million Lumias shipped representing an increase of 40 per cent from the 6.3 million smartphones sold in the same period last year.
But Mobile Phones sales of €1.49 billion were down 37 per cent year-on-year, with the 55.8 million devices representing a 27 per cent decrease from 76.6 million a year earlier. This number includes 5.9 million Asha full-touch devices, which Nokia refers to as “smartphones”.
For the businesses that will form the core of the new Nokia, NSN saw an operating profit of €166 million, down 9 per cent year-on-year, on sales of €2.59 billion, down 26 per cent. The company has been through a restructure that has seen a new focus on its central business, which while decreasing its size is intended to improve its profitability.
But in addition to this refocus, Nokia said that NSN had also seen “reduced wireless infrastructure deployment activity, which affected both Mobile Broadband and Global Services, and the net negative effect of foreign currency fluctuations”.
Slowed sales from the prior sequential quarter were attributed to seasonality.
And the HERE mapping service saw an operating profit of €14 million, compared with a prior-year loss of €56 million, on sales of €211 million, down 20 per cent from €265 million.
On a group level, the company reported a loss attributable to equity holders of €91 million, compared with €959 million in the prior year period, on sales of €5.66 billion, down from €7.24 billion.
On an operating level, it saw a profit of €118 million for the quarter, compared with a year-ago loss of €564 million.
For the fourth quarter, Nokia said it expects to report the Devices & Services unit as discontinued operations. This unit is expected to deliver a negative operating margin on a non-IFRS basis during the period.
It expects NSN to deliver “solid net sales growth on a sequential basis, supported by strong industry seasonality”. It is continuing to target an annual operating expenses and production overhead saving of €1.5 billion by the end of 2013, compared with the end of 2011.