Nokia May Post Loss, Lower Sales Before Windows Phone Debut
Nokia Oyj (NOK1V) may report a second consecutive quarterly loss tomorrow, with smartphone shipments falling to the lowest since 2009, as the company prepares its first handsets based on Microsoft Corp. (MSFT)’s Windows Phone 7.
The third-quarter net loss may have reached 241 million euros ($330 million), after a 368 million-euro loss in the second quarter, according to the average of 22 analyst estimates compiled by Bloomberg. Sales of smartphones, which have computer-like features, may have fallen 41 percent to 15.7 million units from a year earlier, analysts estimated.
Nokia’s stock has slumped 46 percent in the eight months since Chief Executive Officer Stephen Elop decided to phase out the company’s 10-year-old Symbian operating system and switch to Microsoft software to help win back customers from Apple Inc. (AAPL) and Google Inc. (GOOG) Elop is set to introduce a new line based on Windows Phone 7 at the Nokia World event in London next week.
“The No. 1 thing is the guidance for fourth quarter, because that indicates what they expect to get from the first Windows Phone devices,” said Mikko Ervasti, an Evli Bank analyst in Helsinki who advises buying Nokia shares.
Nokia, based in Espoo, Finland, has lost more than half its smartphone market share since the introduction of Apple’s iPhone in 2007 as it struggled with outdated Symbian software. Its share of the smartphone market declined to 20.9 percent in the second quarter, according to researcher Gartner Inc. It was 50.8 percent in the second quarter of 2007.
Cupertino, California-based Apple yesterday reported profit and sales that missed analyst estimates as iPhone sales disappointed. Apple sold 17.07 million iPhones, compared with the 20 million predicted by analysts surveyed by Bloomberg. Consumers held off buying the smartphone ahead of the release of a new version last week, after the quarter ended.
The 15.7 million estimated third-quarter smartphone sales at Nokia would be the lowest since the first quarter of 2009, when the company shipped 13.7 million of the advanced handsets.
Michael Schroeder, a Helsinki-based analyst at FIM Bank, said shipments may have fallen to as few as 12 million units last quarter, dropping further to 10 million in the current quarter, because Windows Phone devices probably won’t be sold in “meaningful volumes” until 2012. Schroeder cut his rating on Nokia to “hold” from “accumulate” on Oct. 17.
The shares added 0.2 percent to 4.41 euros as of 10:41 a.m. in Helsinki. They have dropped about 44 percent since Elop, a former Microsoft executive, took over in September last year. The company has a market value of 16.5 billion euros.
Nokia is scheduled to report earnings at about 1 p.m. in Finland tomorrow, with a conference call at 3 p.m. that can be monitored through the company’s website.
Third-quarter sales were probably 8.8 billion euros, a 14 percent decline from a year earlier and 5.2 percent lower than the previous quarter, according to analyst estimates. Adjusted profit margin in the handset division may have been 1.5 percent below breakeven, the estimates show.
Nokia may have shipped 78.7 million lower-priced phones, compared with 83.9 million a year earlier, even after pushing out dual-SIM models in India and resolving inventory problems in China, analysts estimated. The shift of demand to more complex handsets is prompting the venture between Sony Corp. and Ericsson AB to exit its low-end phone business.
Handset makers typically have their biggest sales in the fourth quarter as carriers in the U.S. and Europe promote holiday offers. Apple set a record of selling more than 4 million iPhone 4S devices over the debut weekend.
“Anything that alludes to a seasonal build, quarter-on- quarter growth of 10 percent or more, will be treated favorably by investors,” said Lee Simpson, an analyst at Jefferies International in London who recommends holding the shares.
Nokia said in February that it aimed to sell another 150 million Symbian devices before ending that range. Since the Microsoft linkup in February, Nokia has made two major updates and introduced seven Symbian handsets.
The Nokia Siemens network equipment venture may have had sales of 3.4 billion euros, according to the average of 19 analyst estimates. The 50-50 venture with Siemens AG (SIE) may report an operating loss of 66 million euros, giving it a margin of 2 percent below breakeven. Nokia forecast the unit would have a loss margin of zero to 3 percent on sales of 3.2 billion euros to 3.5 billion euros.
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