Nokia results: hope for Windows Phone?

It is almost one year since Nokia’s dramatic announcement that it would transition its smartphone range to Windows Phone. Today the company released its results for the fourth quarter and for the full year 2011, the first since the release of the the Lumia range of Windows Phone devices. How it is doing?

This is one you can spin either way. The negative view: Nokia is losing money. Sales are down 21% year on year for the quarter and 9% for the full year, and the company reported an operating loss of just over a billion Euro for the year, most of which was in the last quarter.

If you look at the quarter on quarter device sales, they are down in both smart devices and mobile phones. The Symbian business has not held up as well as the company hoped:

changing market conditions are putting increased pressure on Symbian. In certain markets, there has been an acceleration of the anticipated trend towards lower-priced smartphones with specifications that are different from Symbian’s traditional strengths. As a result of the changing market conditions, combined with our increased focus on Lumia, we now believe that we will sell fewer Symbian devices than we previously anticipated.

says the press release. As for Windows Phone and Lumia, CEO Stephen Elop says that “well over 1 million Lumia devices” have been sold: a start, but still tiny relative to Apple iOS and Google Android. Elop cleverly calls it a “beachhead”, but given the energy Nokia put into the launch I suspect it is disappointed with the numbers.

Put this in context though and there are reasons for hope. First, Nokia’s speed of execution is impressive, from announcement to the first Windows Phones in nine months or so. Further, the Lumia (judging by the Lumia 800 I have been using) does not feel like a device rushed to market. The design is excellent, and within the small world of Windows Phone 7 hardware Nokia has established itself as the brand of first choice.

Second, despite the dismal sales for Windows Phone 7 since its launch, there are signs that Microsoft may yet emerge from the wreckage inflicted on the market by iOS and Android in better shape than others. WebOS has all-but gone. RIM has yet to convince us that it has a viable recovery strategy. Intel Tizen is just getting started. If Microsoft has a successful launch for Windows 8, Elop’s “third ecosystem” idea may yet come to fruition.

Third, Nokia has already shown that it is better able to market Windows Phone 7 than Microsoft itself, or its other mobile partners. Lumia made a good splash at CES in January, and the platform may gain some market share in the influential US market.

Nokia is not just Windows Phone though, and even if its smartphone strategy starts to work it has those falling Symbian sales to contend with. It will not be easy, even taking an optimistic view.

Nor will it be easy for Windows 8 to succeed in a tablet market owned by Apple at the high end and by Amazon/Android at the low end.

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2 comments to Nokia results: hope for Windows Phone?

  • Beachhead is how Elop has been describing the strategy since before the figures broke, so that’s not a ‘how do we spin it’ line, it’s their launch and marketing strategy. Get a device into a market, get some momentum, follow up with a fuller range while you launch the same device in a second market.

  • Tom

    Nokia’s IFRS loss was due entirely to the writedown for Navteq. In fact, Nokia is *still* carrying €4.1 billion in goodwill for Navteq — which means that more writedowns may be coming in future quarters.

    Excluding accounting writedowns, Nokia earned €478 million in operating income this quarter. That’s around 40% of what it earned in Q4 2010. Not great, but not the disaster that detractors are making it out to be.

    Note: At $250 MM of quarterly subsidy, and around $25 per copy of Windows Phone, Microsoft will break even on Nokia at about 10 million phones per quarter — or about 1/4 of iPhone. Right now they’re at one million. Puts into perspective just how much money Microsoft is throwing at mobile.