Struggling smartphone giant Nokia this week confirmed its previous Q4 2012 financial-results estimates, posting a profit for both the quarter and full-year 2012. But the big news for those of us in the Microsoft sphere is that Nokia’s smartphone business is showing signs of life: The firm sold 4.4 million Windows Phone-based Lumia smartphones in the quarter.
“We are very encouraged that our team’s execution against our business strategy has started to translate into financial results,” Nokia CEO Stephen Elop is quoted in a prepared statement. “Most notably, we are pleased that Nokia Group reached underlying operating profitability in the fourth quarter.”
Two weeks ago, an ebullient Nokia took the rare step of previewing its earnings rebound, as I reported in "Surprise! Nokia’s Smartphone Business Rebounds in Q4 2012." This week’s official release mirrors the earlier preview.
For the fourth quarter of 2012, Nokia posted an operating profit of $586 million on revenues of $10.7 billion. That’s a big improvement over the loss of $1.27 billion it posted in the same quarter a year ago, but Nokia still posted an operating loss of $3 billion for calendar year 2012, far more than its loss of $1.43 billion in 2011.
Nokia confirmed that it sold 4.4 million Lumia smartphones is the quarter, alongside 2.2 million Symbian smartphones and 9.3 million Asha devices. (It sold 13.4 million Lumia devices in all of 2012.) Although these figures are dwarfed by smartphones sales at Apple (47.8 million iPhones in the quarter) and Samsung (an estimated 62 million smart phones, almost all of which are based on Android), there are other troubling signs for Nokia.
For starters, Nokia’s device sales continue their downward spiral, year-over-year, and Nokia now sells far fewer Windows Phone handsets than it did in previous years with devices based on other platforms. Worse, perhaps, Nokia’s sales in the US market, in particular, are almost non-existent. North America is Nokia’s smallest market by far, with just 700,000 devices sold overall in the quarter. By comparison, the firm sold 28.7 million devices in Asia/Pacific, 21.8 million in Middle East/Africa, and 19.4 million in Europe. So sales of Nokia devices, including Lumia, in the United States are less than a twentieth of sales in Europe. (However, almost all Nokia sales in the United States are from Lumia smartphones, whereas Nokia sales elsewhere are a mix of all the firm’s device types.)
Still, it’s important to understand how well Lumias are selling in the United States. Looking at the negative, Nokia sold 500,000 Lumias in North America in Q4 2011, so this past quarter’s results aren’t really that much higher despite the high-profile launch of Windows Phone 8. That said, North America experienced sharp net sales growth of 270 percent year-over-year, the only region in which Nokia saw such growth. In North America, net sales of Lumia smartphones rose from $53 million in Q4 2011 to $196 million in Q4 2012.
Another possible positive sign: Nokia’s Windows Phone 8 handsets didn’t ship until the second half of the quarter, and it’s likely that Lumia sales were nearly non-existent in the weeks building up to that launch. Nokia notes that unit sales volumes were affected by supply constraints as it ramped up its production capacity, particularly for the flagship Lumia 920, and that these constraints have continued into the first quarter of 2013. And the average selling price of Nokia’s smartphones jumped from $213 in Q3 2012 to $256 in Q4, which Nokia attributes to demand for the high-end Lumia 920 and other Lumias, which cost more than the legacy Symbian devices that are now in decline.