Nokia Sales Miss Analysts’ Estimates as Handset Demand Wanes

Nokia Oyj (NOK1V), the Finnish mobile-phone maker attempting a comeback, reported revenue that missed analysts’ estimates as intensifying competition across the market cut the number of handsets sold by 27 percent.

Second-quarter sales fell 24 percent to 5.7 billion euros ($7.5 billion), Espoo, Finland-based Nokia said today. Analysts projected 6.4 billion euros, the average of estimates compiled by Bloomberg. While sales of the Lumia smartphone line rose to 7.4 million units, demand for older and more basic phones fell.

Nokia has lost more than 5 billion euros in nine quarters as Chief Executive Officer Stephen Elop’s comeback bid hasn’t reversed market-share declines. Nokia’s basic phones are losing users to Chinese rivals and new smartphones have failed to stop shoppers from picking up Samsung (005930) Electronics Co. and Apple Inc. (AAPL) devices. Sales at the Nokia Siemens Networks unit also dropped.

“The revenue shortfall in both the handset business and in Nokia Siemens is the key takeaway,” said Hakan Wranne, an analyst at Swedbank AB (SWEDA) in Stockholm. “Less and less of this company remains.”

Nokia fell 2.8 percent to 3.01 euros in Helsinki, paring the gain to 2.9 percent this year. The stock lost 22 percent last year, its fifth straight annual drop.

Photographer: Henrik Kettunen/Bloomberg

Sales fell 24 percent to 5.7 billion euros ($7.5 billion), Espoo, Finland-based Nokia said today in a statement. Analysts projected 6.4 billion euros, the average of estimates compiled by Bloomberg. Close

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Photographer: Henrik Kettunen/Bloomberg

Sales fell 24 percent to 5.7 billion euros ($7.5 billion), Espoo, Finland-based Nokia said today in a statement. Analysts projected 6.4 billion euros, the average of estimates compiled by Bloomberg.

The second-quarter net loss narrowed to 227 million euros from 1.4 billion euros a year earlier. Analysts projected a loss of 258.8 million euros.

Lumia Gains

Nokia joins rivals such as BlackBerry and Samsung in reporting results trailing estimates, signaling a slowing market as an increasing number of users in more developed countries have already upgraded to smartphones.

Sales volumes of both Nokia’s basic phones and smartphones fell 27 percent. Basic-phone sales were 53.7 million, missing the 54.4 million projected by analysts surveyed by Bloomberg.

Sales of the Lumia smartphones, which run Microsoft Corp. (MSFT)’s Windows software, climbed 32 percent from the first quarter. Nokia has introduced new versions, such as the Lumia 1020 with a 41-megapixel camera unveiled last week, to spur demand. Analysts projected Lumia volumes of 7.8 million units.

Lumia sales are still a fraction of the more than 100 million smartphones Samsung and Apple combined sell each quarter. Apple sold 37.4 million iPhones in the quarter through March and is set to report its next quarterly earnings July 23.

The operating loss at Nokia’s mobile devices business, excluding some items, was equivalent to 1.2 percent of sales. Analysts projected a loss of 2.2 percent. This quarter, that margin will be in a range of minus 6 to positive 2, while sales at the unit will rise from the second quarter, Nokia predicted.

BlackBerry, Samsung

To reduce costs, Elop has cut more than 20,000 jobs and closed production and research sites since taking over in 2010. Nokia said today it is cutting a further 440 positions in its mobile-phone business. The company may need to “revisit its cost base,” Sami Sarkamies, an analyst at Nordea Bank AB, said in a note to clients after the report.

One of the first smartphone makers, Nokia dominated with a global market share topping 50 percent before Apple’s iPhone and Google Inc.’s Android software were introduced about six years ago. Nokia’s market share has since collapsed to about 3 percent, according to IDC. The slump has pushed Nokia to losses and forced it to cancel its dividend for the first time in at least 143 years.

Similarly to Nokia, Canada’s BlackBerry (BBRY) has also struggled to challenge Apple and Samsung. The company missed analysts’ estimates for phone shipments and profit for the latest quarter, sending its stock down the most in 13 years.

Samsung, the world’s largest mobile-phone maker, this month posted quarterly operating income of about 9.5 trillion won ($8.3 billion), missing the 10 trillion-won average estimate.

Junk Rating

Nokia’s net cash fell to 4.1 billion euros at the end of the quarter from 4.5 billion euros in the first quarter. Its debt rating was cut this month one step deeper into junk by Standard & Poor’s, which said the handset maker’s net cash may tumble after a deal to buy Siemens AG (SIE)’s share in their six-year-old mobile-equipment venture for 1.7 billion euros.

Nokia Siemens reported an operating profit of 8 million euros as sales fell 17 percent to 2.78 billion euros. Its operating margin, excluding some items, expanded to 11.8 percent from 0.8 percent a year earlier.

Nokia Siemens now aims to cut 1.5 billion euros in costs by the end of this year compared with the end of 2011. Its previous goal was more than 1 billion euros.

Nokia must focus on “improving the competitiveness and innovation of our products while we manage our costs and keep moving with urgency,” Elop told reporters on a conference call.

To contact the reporter on this story: Adam Ewing in Stockholm at aewing5@bloomberg.net

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

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