Nokia Earnings Dip, With Windows Phone Test Still to Come

Nokia reported dips in revenue and profit for the most recent quarter, but the company's true test is still coming with Windows Phone.

Nokia reported another dip in revenue and profit for the third quarter of 2011, but analysts found those results nonetheless better than expected.

On Oct. 20, Nokia reported third-quarter net sales of $12.3 billion, a year-over-year decline of 13 percent, with operating losses of $98.4 million. It sold 16.8 million "smart devices" and 89.9 million mobile phones, the latter apparently somewhat above most analysts' expectations.

Nokia's biggest test starts later this year, when its first Windows Phones begin arriving on store shelves. Nokia CEO Stephen Elop made the controversial decision to abandon the Finnish phone-maker's homegrown operating systems, including Symbian, in order to develop a new line of devices running Microsoft's smartphone software. That maneuver, if it succeeds, could reestablish Nokia's competitive foothold against Google Android, which is swallowing enormous chunks of the low- to mid-range mobility market.

If it fails, of course, Nokia's path forward is uncertain. "The reality is if we are not successful with Windows Phone, it doesn't matter what we do," Chris Weber, president of Nokia, told AllThingsD in an August interview.

In any case, Nokia is facing the Herculean task of repositioning itself to meet Elop's vision, a process complete with layoffs and restructuring.

"During the third quarter, we continued to take the action necessary to drive the structural changes required for Nokia's long-term success," Elop wrote in an Oct. 20 statement accompanying the earnings results. "Additionally, I am encouraged by our progress around the first Nokia experience with Windows Phone."

Over the summer, Elop (a former Microsoft executive) flashed a prototype smartphone running Windows Phone during a press conference. A number of people in the audience snapped spy photos and video of the device, which looked like a Nokia N9 smartphone modified for Microsoft's smartphone platform. In subsequent months, news and images leaked of similar devices, including two code-named Sea Ray and Sabre.

The N9 features a 3.9-inch active-matrix organic LED (AMOLED) screen, curved to facilitate gesture control and married to a body engineered from a single piece of polycarbonate. Other onboard hardware includes near-field communication (NFC) technology, which allows users to share photos and even financial data by tapping their smartphone against another NFC-enabled device. That could all serve as an indicator of the hardware Nokia intends to marry with the Windows Phone platform, which is currently being upgraded with the wide-ranging Mango update.

Mango offers some 500 new tweaks and features, including a revamped Office Hub. For its part, Microsoft hopes that the update, in conjunction with manufacturers such as Nokia producing new devices, will finally gain it some traction in the market against the likes of Google Android and Apple's iPhone.

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