Nokia reports third-quarter loss despite strong low-end handset sales

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NokiaCorp. swung to a second successive net loss in the third quarter, but reported better-than-expected results thanks to higher sales of its low-end cell phones.

The company’s American depositary shares jumped over 8%, as results highlighted an increase in shipments of its cheaper feature phones owing to strong sales of dual-SIM handsets. Nokia shipped 89.8 million feature phones in the quarter, up 8% from a year earlier.

The world’s largest cell-phone company by volume posted a net loss of 68 million ($93.6 million), beating Wall Street expectations of a 321 million loss. Sales dropped 13% to 8.98 billion.

“It’s important to emphasise we are on a journey during which we are systematically transforming our company for long term success,” Chief Executive Stephen Elop said in a call with analysts. “In [the third quarter] we started to see signs of early progress.”

In trading on the New York Stock Exchange, American depositary shares of Nokia rose 8.5% to $6.65.

Nokia’s American shares are down 35% since Mr. Elop announced in February that the company would ditch its own smartphone software Symbian and build smartphones using software fromMicrosoftCorp.’s Windows operating system to better compete withAppleInc.’s iPhone and smartphones usingGoogleInc.’s Android operating system.

Smartphone sales, which are driving the handset industry, continued to slump, as Nokia relies on Symbian until it launches its first Windows smartphone, due in the current quarter. Smartphone volumes fell 38% to 16.8 million units in the quarter, and average selling prices fell 21.5% to 51.

The drop leaves Nokia in third place globally after Apple sold 17.1 million iPhones in its fiscal quarter ended 24 September, and Samsung Electronics Co. shipped more than 20 million smartphones in the quarter ended 30 September, according to a report from Dow Jones Newswires.

In all, Nokia’s mobile-handset shipments overall in the third quarter fell 3% to 106.6 million units from the same period a year earlier.

Strategy Analytics industry analyst Neil Mawston said the sales recovery in low-end-mass-market feature phones was a positive surprise.

“Their launch of dual-SIM devices seems to have been the key. This report shows that they’ve managed to recover nicely,” he said.

Operating margin, a measure of profitability, for Nokia’s Devices & Services unit dropped to 2.4% in the quarter, down from 11.3% a year earlier, but significantly improved from a negative 4.5% in the previous quarter.

The Finnish firm said it expects handset operating margins to be between 1% and 5% in the fourth quarter, and expects to have 3.9 billion in cash and other assets by the end of the year. The company’s also reiterated its target of reducing operating expenses in its Devices & Services unit by over 1 billion for the full year 2013.

Nokia Siemens Networks, the telecom-equipment joint venture with Siemens AG, reported a 114 million operating loss in the quarter, in line with a loss of 116 million a year earlier. Sales rose 16% year-on-year to 3.41 billion.

The company saw its share price soar as high as 12 per cent on the news before closing 5.5 per cent higher on a Helsinki stock exchange down 1.2 per cent. Analysts polled by the Dow Jones Newswires had expected the company to post a net loss of 321 million euros for the quarter.

The company “is going the right way because the profitability was … better than forecasted,” Pohjola Bank analyst Hannu Rauhala told AFP.

Although still the world’s largest mobile phone maker, Nokia is operating in a rapidly changing landscape and has in the past couple of years seen RIM’s Blackberry, Apple’s iPhone and handsets running Google’s Android platform take big bites out of its market share.

Nokia is hoping to halt the slide with its first Windowsbased phone, which Microsoft said Thursday should hit stores next week.

NEW HANDSETS

Nokia is getting ready to unveil three smartphone handsets at its annual trade show in London next week, according to leaked details.

The Finnish group has seen worldwide smartphone sales collapse this year after ceding ground to Apple and the Android community, and is pinning its hopes for a comeback on its decision toadopt Microsoft’s Windows Phoneoperating system.

Its firstWindowshandsets, believed to be called the Nokia 800, the Ace and the Sabre, will go on show next Wednesday and are likely to be available in the shops in mid-November, in time for the Christmas shopping season.

The Nokia 800, dubbed the SeaRay, will come in a pink, light blue or black casing according topress shotsleaked this week. It will have a curved glass 3.7 in screen, and an eight-megapixel camera. Its body is based on the Nokia N9 smartphone, which wasreleased in a limited number of countries earlier this year, but not in the UK or United States.

The Sabre looks more like the iPhone, with a 3.5 inch screen and a five-megapixel camera.

The third handset, the Ace, appears to be designed for business users. It is the only new device with a keyboard, which is hidden behind a slide screen, and the casing is black with silver detailing. According to TechWith,it has an eight-megapixel camera.

The current phones will use Mango, the codename for Windows Phone version 7.5, which Nokia was not able to influence. The manufacturer will have a say in the design of the next iteration, codenamed Apollo, which is expected to be released in 2012.

Sources: WSJ, ottawacitizen, guardian

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