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Nokia Lumia Sales Seen Topping 1 Million in Relief for Stock

Nokia Oyj (NOK1V)’s first phones running Microsoft Corp. (MSFT) software may have sold enough units last year to help rebuild investor confidence in the Finnish company, which lost $19 billion in market value in 2011.

The Lumia handsets, which went on sale in Europe in November, probably sold 1.3 million units globally to operators and retailers by the end of last year, according to the average estimate of 22 analysts compiled by Bloomberg. The projections range from 800,000 to 2 million and only one analyst predicted sales of fewer than 1 million handsets.

“The numbers look promising,” said Espen Furnes, an Oslo-based fund manager at Storebrand Asset Management, which sold Nokia shares last year and counts Apple Inc. (AAPL) in more than $60 billion it oversees. “If Nokia is able to have a strong launch and surpass at least 1 million and keep that type of momentum, this would help put them in a credible position that is crucial to winning back investors.”

Chief Executive Officer Stephen Elop has staked the future of Nokia’s smartphone business on the Lumia series, after deciding almost a year ago that the Espoo, Finland-based company would retire its homegrown Symbian and MeeGo handsets. The early shipment figures are important because investors had doubted the alliance with Microsoft could compete with Apple’s iPhone and devices running on Android, developed by Google Inc.

Elop, 48, has refused to give sales forecasts for the Lumia models and kept initial expectations low by stressing the long-term work involved in building a new “ecosystem” of applications and developers with Microsoft. The partnership with the world’s largest software maker was announced on Feb. 11.

Hero Handsets?

“There weren’t a lot of the hero handsets out there -- HTC were struggling, RIM didn’t have a show-me device, Sony Ericsson and Motorola weren’t really stepping into the mix, so there was probably enough space for Nokia to be able to point to fourth-quarter numbers they were happy with,” said Lee Simpson, a London-based analyst at Jefferies International.

Sales of the Symbian smartphone line declined 36 percent in the two quarters between the Lumia announcement and launch, and will likely have a bigger effect on revenue and profit. Nokia, which reports earnings Jan. 26, probably had a fourth-quarter loss of 92 million euros ($119 million), as sales may have fallen 21 percent to 10 billion euros, separate surveys of analysts showed. Nokia spokesman Doug Dawson declined to comment before the release.

Cheaper Models

Nokia’s shares fell 52 percent in 2011. Today, the stock fell 0.5 percent to 4.32 euros in Helsinki trading as of 4:05 p.m. Since the beginning of this year, Nokia has gained 15 percent, while Apple rose 3.8 percent and HTC was down 1.7 percent. The Lumia models won respect from reviewers and bloggers, including 13 awards at the Consumer Electronics Show in Las Vegas.

“What’s really needed is cheaper models to compensate for the declining trend in Symbian, which sold in large numbers in the main smartphone category of 200 to 300 euros,” said FIM Bank analyst Michael Schroeder. Those aren’t likely to come until the second half, he said.

The 420-euro Lumia 800 went on sale in Europe the week of Nov. 14, while the 270-euro Lumia 710 started selling in four Asian markets and Russia in December. Carphone Warehouse Group Plc (CPW)’s website carries Samsung Electronics Co.’s Galaxy Y for 115 pounds ($178) without a contract, the Galaxy S 2 for 460 pounds without a contract, and HTC’s Desire S for 290 pounds.

Debt Rating Cuts

“Half a million would be realistic and acceptable given the short period of time these handsets have been on the market,” said SEB Enskilda analyst Mats Nystroem of the Lumia.

The fact that Nokia, the world’s largest mobile-phone maker, had been eclipsed in smartphones gradually became apparent to shareholders in the three years after the 2007 Apple iPhone introduction. The discovery erased more than 60 billion euros in value before then-Microsoft executive Elop was appointed to take over in Sept. 2010. Nokia’s debt ratings were cut last year by Standard & Poor’s and Moody’s on concerns that a turnaround would take too long.

Elop introduced a third model on Jan. 9, the Lumia 900, on AT&T Inc. (T) with a larger screen and the ability to operate on so-called 4G high-speed broadband networks.

Lumia sales may reach 3.2 million units this quarter as the handsets ramp up in Asia, according to the average of 16 analyst estimates. Estimates for full-year sales of Windows Phones have reached as high as 37 million units from Morgan Stanley.

‘Too Rich’

First-quarter estimates range from 1.5 million to 6 million. The smartphone market may have grown 50 percent last year, Gartner Inc. analysts estimated in November, compared with 13.9 percent growth in 2008.

Sales to consumers were probably less than Nokia’s shipments to stores, since the Lumia was not broadly sold out, the analysts said. Apple may have sold 30 million iPhones in the final quarter of 2011, Piper Jaffray analyst Gene Munster said. Apple is scheduled to report earnings tomorrow.

“The Lumia 800 was just a little bit too rich for a lot of people’s blood in terms of a new Windows Phone,” said Ernest Doku, a technology analyst at uSwitch.com, a U.K. website that helps consumers compare prices. Rivals like Apple have competed by discounting older models that consumers still want, he said.

The Lumia didn’t make USwitch’s top-10 handsets list for December based on user searches and clicks. The list was headed by Samsung’s Android-powered Galaxy S2.

Nokia’s fourth-quarter results will also include the N9, a Lumia 800 lookalike running Nokia smartphone software called MeeGo, which began shipping in September at prices from 480 euros. The N9 may have sold 1.4 million units last quarter, Pareto Oehman analyst Helena Nordman-Knutson said.

“People forget it’s not all about Lumia, there’s the N9 as well and it’s part of this transition,” she said. “With these new devices the average selling price could lift because the proportion of lower-priced smartphones will decrease.”

To contact the reporter on this story: Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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