Nokia confirmed its anticipated losses for the quarter to 30 June 2011, including a sharp drop-off in smartphone volumes which – as expected – has enabled Apple to claim the number-one smartphone vendor crown. Indeed, with Nokia’s smartphone volumes falling by 31 percent to 16.7 million from 24.2 million in the first quarter of 2011, there is a real possibility that Samsung could land the number-two spot – especially if it has been able to capitalise on Nokia’s weakness. In addition to the drop-off of smartphone sales, Nokia also reported a 16 percent drop in the number of mass-market devices it delivered, to 71.8 million. In total, device volumes fell by 20 percent to 88.5 million from 111 million.

For the quarter, Nokia reported a net loss attributable to shareholders of EUR368 million, compared with a profit of EUR227 million last year, on net sales of EUR9.28 billion, down from EUR10 billion a year ago. Stephen Elop, CEO of the company, said that “our immediate action to manage unexpected sales and inventory patterns enabled us to create healthier sales channel dynamics, which led to greater business stability in the latter weeks of the quarter.” This included action in China and Europe to address an inventory build-up which occurred during the first quarter, a “more responsive approach to product pricing around the world,” a shifted sales and marketing focus onto retail consumers, and “changes in certain critical sales management.”

Sales in the Devices & Services unit fell by 20 percent to EUR5.47 billion, including the benefit of a EUR430 million intellectual property royalty income – believed to be associated (at least in part) with the settlement of its legal battle with Apple. This unit saw an operating loss of EUR247 million, compared with a prior-year profit of EUR616 million. The drop-off in mass-market device volumes was “driven by distributors and operators purchasing fewer of our mobile phones during the second quarter 2011 as they reduced their inventories of these devices which were slightly above normal levels at the end of the first quarter 2011.” It also noted its lack of dual SIM phones, “a growing part of the market.”

Interestingly, following reports of widespread price cuts in Nokia’s smartphone portfolio, average selling prices in this line increased by 2 percent to EUR142 – this was attributed to the shipment of new Symbian OS devices. Contrastingly, ASPs for its mass market devices decreased by 3 percent to EUR36. Its consolidated mobile device ASP increased by 2 percent to EUR62. The company saw a 23 percent decrease in the value of sales to Europe, a 30 percent decrease of sales in APAC, and a 34 percent drop in China, which were its three biggest markets in Q2 last year. Indeed, the drop in China means that MEA has now become Nokia’s third biggest market, bucking the trend to report a 6 percent increase in sales.

Nokia Siemens Networks reported an operating loss of EUR111 million, down from EUR179 million, on net sales which increased by 20 percent to EUR3.64 billion. It was noted that the results include the businesses acquired from Motorola Solutions as of 30 April 2011, meaning the figures are not directly comparable. Excluding the acquired business, sales would have increased by 13 percent year-on-year. Since the end of the quarter, NSN has said it has ended talks with potential private equity investors. Nokia said that “together with Siemens, Nokia is evaluating alternatives that would create an industry leading company with best-in-class profitability and which is viable on a stand-alone basis.”

Looking forward, Nokia  said that it expects its non-IFRS Devices & Services operating margin in the third quarter to be “slightly above breakeven, ranging either above or below this level by approximately 2 percentage points.” This metric in Q2 was 6.7 percent. Operating margin at NSN will be between -3 percent and breakeven. Elop also said that Nokia has identified “additional opportunities for operational improvement,” stating that it is accelerating its plans for expense reductions, and plans to exceed its previous target of EUR1 billion savings in the Devices & Services unit for the full year 2013.