Nokia CEO Stephen Elop tried sounding a note of cautious optimism even as his struggling company reported significant quarterly losses.
Nokia reported second-quarter profits that beat most
analysts' expectations, but the Finnish phone-maker is still struggling to halt
a precipitous market-share slide.
In all, Nokia reported a net sales decline of 7 percent and
an operating profit decline of 41 percent (to $556 million) over the year-ago
quarter. Despite that softness in sales and revenue, the company reported two
bright spots: an agreement with Microsoft to port Windows Phone software onto
Nokia smartphones, and Apple agreeing to pay undisclosed royalties as part of a
Despite those royalties and settlement, Apple
has apparently overtaken Nokia to become the world's largest smartphone
producer by volume. Low-cost Google Android devices represent another
substantial concern, as does BlackBerry's continued entrenchment in the
"The challenges we are facing during our strategic
transformation manifested in a greater than expected way in Q2 2011," Nokia CEO
Stephen Elop wrote in a July 21 statement accompanying the results. "However,
even within the quarter, I believe our actions to mitigate the impact of these
challenges have started to have a positive impact on the underlying health of
He claimed that a "more responsive approach to product pricing,"
along with a shift in sales focus and marketing resources, helped create what
he termed "healthier sales channel dynamics." That being said, the company sees
no relief from the competitive pressures squeezing its bottom line, at least in
the near term.
"While our Q2 results were clearly disappointing, we are
executing well on the initiatives that are most important to our longer-term
competitiveness," Elop wrote. "We firmly believe that our deliberate and
unwavering commitment to making the changes necessary at Nokia is the right way
to deal with the disruptive forces in our industry and drive value creation for
In June, Elop offered an audience a glimpse of what looked
like a Nokia N9 smartphone running Windows Phone. The N9, which currently runs
a MeeGo operating system slated for mothballing by Nokia, married a curved
3.9-inch AMOLED (active-matrix organic LED) screen to a body engineered from a
single piece of polycarbonate. The first Nokia devices running Windows Phone
are slated to make their debut at the end of 2011.
News that Nokia will abandon its homegrown Symbian operating
system, however, has led to a significant dip in Symbian handset sales, as
customers flee the platform in favor of one that offers continuing support. That's
led to analyst pessimism about Nokia's prospects over the next several
"While we maintain our belief the Nokia-Microsoft
partnership is best positioned to potentially create a third viable smartphone
ecosystem," Canaccord Genuity analyst Michael Walkley wrote in a June 1
research note, "we are increasingly concerned about sales for Nokia's Symbian
devices during the transition period."
Nicholas Kolakowski on Twitter
Nicholas Kolakowski is a staff editor at eWEEK, covering Microsoft and other companies in the enterprise space, as well as evolving technology such as tablet PCs. His work has appeared in The Washington Post, Playboy, WebMD, AARP the Magazine, AutoWeek, Washington City Paper, Trader Monthly, and Private Air. He lives in Brooklyn, New York.