Nokia posts Q1 net loss as sales fall 29%

Nokia moved to a net loss of EUR 1.57 billion or EUR 0.25 per share in the first quarter, on sales down 29 percent to EUR 7.35 billion. The operating result dropped to a loss of EUR 1.34 billion, versus a profit of EUR 439 million a year earlier. In line with its earlier profit warning, the company's main division Devices & Services plunged to an operating loss before one-time items of EUR 127 million, versus a profit of EUR 733 million in the year-earlier period. Sales at the division fell 40 percent year-on-year to EUR 4.25 billion, as its new smartphones received a mixed reception and traditional feature phones were hit by tough competition. 

The company sold 82.7 million handsets in the quarter, 24 percent less than a year earlier, and the average price dropped to EUR 51 per phone from EUR 65 a year ago. While the ASP for smartphones was down only 2 percent to EUR 143, helped by services revenues, the average price of a traditional phone dropped 18 percent to EUR 38. The sales decline was strongest in China and Europe, where Nokia is suffering from competition from lower-priced touch devices from Chinese producers such as Huawei and ZTE.  

Nokia CEO Stephen Elop said the launch of the Lumia smartphone in the US exceeded expectations, but the company was having a harder time gaining traction in other markets such as the UK. At the low end of the market, where touch devices are challenging traditional feature phones, the group was suffering from gaps in its portfolio. It plans to launch new Series 40 phones in Q2 to address this, including seven new Asha phones. 

At the same time, the company plans to "accelerate and substantially deepen" cost savings at the Devices & Services division, which are currently targeted at over EUR 1 billion by the end of 2013. More details on the latter will be announced shortly, Nokia said. The company maintained its outlook for the adjusted operating margin at devices and services to be similar to or worse than the negative 3 percent reported in Q1. 

While Nokia's operating cash flow was a negative EUR 590 million in Q1, the company still had total cash of EUR 9.8 billion at the end of March. It also received a USD 250 million 'platform support' payment from Microsoft in the quarter, as part of the licensing deal for the Windows Phone OS. Nokia said overall it expects the support payments to slightly outweigh its royalty payments to Microsoft over the life of their agreement.