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Nokia starts 2013 in the black, without Symbian

Thursday 24 January 2013 | 17:01 CET | Market Commentary
After little action in 2011, the Lumia series showed some positive developments last year, putting the brand on the map. The phone was carried and promoted by major operators, and the tech blogs gushed over the new phones, especially the high-end models such as the most recent Lumia 920. Still, the fourth-quarter results show more improvement is needed. 

The core division Devices & Services recorded sales of EUR 3.8 billion, down 36 percent year-on-year. Revenues from smartphones fell 55 percent to EUR 1.2 billion, and sales of other mobile phones were down 19 percent to EUR 2.4 billion. Nokia sold a total 86.3 million phones in the quarter, of which 6.6 million were smartphones, 66 percent less than a year ago. Of the 6.6 million smartphones, 4.4 million were Lumia devices. The average selling price of a Nokia smartphone rose 33 percent year-on-year to EUR 186, helped by the shift from Symbian to Windows devices. 

Quarterly sales of the Lumia range, up from 2.9 million units in Q3, were likely helped by the release of Windows 8/Windows Phone 8, which Microsoft backed with a costly marketing campaign. Windows Phone 8 had a number of other important launch partners (Samsung, HTC, ZTE, Huawei), which helped spread its reach. Nokia likely profited from the increased attention, as well as of course the holiday sales. 

The latest news on Windows Phone has been good, which should encourage Nokia to keep going with the platform. Data from the Kantar Worldpanel Comtech showed a steady improvement in Windows Phone's share of the smartphone market last year. In some markets, it's even reached double digits, such as 13.9 percent in Italy, or a more modest but respectable 5.9 percent in the UK. One can assume that given Nokia's relatively large share of the Windows phones on the market, it's market share must also be growing. 

On a sequential basis, Nokia's figures show similar signs of improvement. In Europe, revenues at the Devices & Services division rose 23 percent versus Q3 and unit sales were up 15 percent over the same period to 19.4 million phones. In North America, the company sold 700,000 phones, more than double the previous quarter, and revenues increased four-fold. Nokia attributed the growth to strong sales of the Lumia smartphones. In contrast, sales in Asia and Latin America were down respectively 4 and 9 percent, and sales in China, where Android and local manufacturers are increasingly dominant, tumbled over 20 percent. 

What's important is in markets where smartphones command a high margin, Nokia appears to be gaining some traction, albeit coming from a low base. An advantage for Nokia is that sales channels, and especially carriers, are happy to see Nokia/Windows Phone emerge as an alternative to Google's Android and Apple’s iPhone.

At the same time, Symbian appears to be officially dead. The Nokia PureView 808, launched barely a year ago, was the last of the Symbian line. Until 2011, Symbian was the biggest mobile operating system, until it was then overtaken by Android and iOS. In Q4, Nokia sold 2.2 million Symbian devices. 

Despite dropping Symbian, Nokia is far from abandoning the low- to mid-end market. With its Asha line, running S40, Nokia aims to compete with Android at the bottom of the market. In Q4, Nokia sold a total 9.3 million Asha phones. Nokia is unlikely to adopt the Android OS, CEO Stephen Elop told an analyst meeting on the results. In the end, it's hoping that developers who start out with the Asha devices will eventually adopt Windows Phone. 

To sum up, the positive points included a profit in Q4 and the uptake of Lumia smartphones in strategically important markets (Europe, the US). The extensive cost reduction programmes also appear to be paying off. Nokia is showing an improving trend on a quarterly basis, but the year-on-year comparison remains rough, especially now that Symbian is dropping from the mix and the company is betting everything on Windows Phone. 



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