Nokia Sells 2M Lumia Smartphones But Warns of Disappointing Quarter

Nokia is warning investors of below-expected first-quarter results, despite selling 2 million Lumia phones. Analysts are wondering whether it's worth climbing aboard the Nokia roller coaster.

Nokia gave investors a warning April 11, announcing in advance of its fiscal 2012 first quarter that its performance wasn€™t quite what it hoped it would be.

During the quarter, Nokia sold more than 2 million Lumia smartphones, at an average price of 200 euros, or about $260 U.S. dollars, and saw €œsequential growth in Lumia device activations every month since starting sales of Lumia devices in November 2011,€ the company reported from Finland.

However, €œcompetitive industry dynamics,€ particularly in India, the Middle East and Africa, as well as gross-margin declines in its Smart Devices business unit, negatively affected Nokia€™s bottom line to a €œgreater extent than previously expected.€

While Nokia anticipated Device & Services operating margins to break even, or be above or below 2 percentage points, the company finished the quarter at approximately negative 3 percent.

Such disappointing results, Nokia CEO Stephen Elop said in a statement, €œillustrates that our Devices & Services business continues to be in the mist of transition.€ Elop added that Nokia has established early momentum with Lumia, and is increasing its investments in Lumia €œto achieve market success.€

In January, Nokia went after first-time smartphone buyers in the United States with the launch of the Lumia 700, the first Nokia Windows Phone to reach U.S. shores, on the T-Mobile network.

Any real fanfare for the Nokia and Microsoft match-up didn€™t arrive until April, however, with the arrival of the high-end, Long-Term Evolution- (LTE-) equipped $100 Lumia 900 on the AT&T network€”too late to help Nokia€™s first-quarter results.

€œNokia continues to be a roller-coaster ride for investor sentiment as product cycles bedazzle but ultimately disappoint,€ analysts with investment firm Jefferies wrote in an April 11 research note. €œFor some hard-heads, the long-term trend to brand irrelevance is embarrassingly plain in some countries. Whatever structural reforms lie in wait €¦ the conundrum remains: Just what is Nokia if not an ailing low-margin box maker?€


Forrester analyst Thomas Husson, in an April 11 blog post, was slightly hopeful for a near-field communication- (NFC-) enabled version of the Nokia Lumia 610, which Nokia announced the same day will debut on the Orange network. While the Lumia 610 is certified for contactless payment via MasterCard PayPass technology and Visa€™s mobile app for payments, Husson believes consumers will more likely take up NFC for uses such as device pairing and data sharing.

€œIt€™s good to see Nokia adding NFC to Lumia devices before the launch of Windows 8. It€™s likely that Nokia and Microsoft will try to position themselves as the leading handset platform for contactless services and secure financial transactions,€ Husson wrote.

He added, however, that Nokia still has to €œexecute perfectly€ in order to get back in the game and emerge as the third platform€”a role RIM would very much like for its upcoming BlackBerry 10€”and that Nokia has already admitted the Lumia 900 has a software bug. It has already, too, announced that a fix will be available around April 16, and all AT&T customers who bought a Lumia 900, or will have done so by April 21, will receive a $100 credit.

Nokia, in its statement, said it will increase its focus on Lumia sales, work on lowering the company€™s cost structure, improving cash flow and maintaining a strong financial position, and bring new products to market during the second quarter.

€œOur best hope was that [fiscal year 2012], although heavy on structural issues, could form a transition year for Nokia,€ wrote the Jefferies analysts. €œIt will be interesting to see if at the more qualitative end of the story [long-term margin targets, ecosystem engagement, improving portfolio and increasing range of WP suitability], management has enough ammo to coax investors back on the roller coaster in [the second half of 2012].€