Nokia Q2 2013 results: Lumia sales up to 7.4 million, company still loses $150 million

Nokia just posted their latest preliminary quarterly financial results and even though the company has suffered a loss their overall standing is good and Lumia smartphone sales are up.

Nokia is reporting decreased revenues of $7.4 billion, down from $9.2 billion during the same quarter last year. The good news is that they only lost $150 million which is tiny compared to their own previous losses and to other smartphone manufacturers who are struggling.

The best news is that their Lumia sales are continuing to grow. Nokia is reporting 7.4 million Lumia devices sold during the quarter, up 32% compared to the previous 5.6 million Lumias sold in the first quarter of the year. This is in no small part due to the popularity of the Lumia 520, the low-end Windows Phone that took the world by storm and shot up to number one in just a few short months.

In other parts of the company, Nokia’s mapping divison, HERE lost around $116 million while Nokia Siemens Networks managed to squeeze an $10 million profit. In an effort to regain profitability Nokia has let go of thousands of employees during the past few years in massive restructurings. And the company won't stop there as more restructuring is planned for the current quarter with up to 440 employees being let go in the near future.  

The company is expecting higher net sales of its smartphones in the next quarter due to wider availability and new products such as the high-end Lumia 1020. However that doesn’t translate in wider margins. In fact the company has lowered its outlook by 2% for the current quarter due to high manufacturing costs of Lumia devices coupled with “competitive industry dynamics”.

Source: Nokia

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51 Comments

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If more carriers offered a get out clause that didn't cost an arm and a leg within the year or two contract, then more phones might get sold.

Yeah that was a decent posting, but they won't be posting profits until MS gets Windows 8.1 & GDR 3 out there. Q3 will be much the same I reckon, the 1020 is amazing, but too expensive to garner massive sales increases and the 925/928 need a price cut themselves so again sales aren't going to jump until Q4 when they will be marked down.

At the same time, Q4, Windows 8.1 will be out and MS will give it a massive marketing push. It should be getting much better reviews than Windows 8, which should give people faith in the Windows brand again which will have a positive halo effect on WP sales. That and the new handsets with larger screens afforded by GDR 3, could make the holiday season and Q4 a good time for Nokia (and Microsoft). A profit in Q4 will be the Xmas present Nokia and Elop need to finally silence the doubters.

That, and I think that the Lumia 1020 is more of a niche product. Basically, Nokia is giving consumers additional option for its high end smartphone line until GDR 3 devices arrive.

DaveBG said,
if they do there will be nothing to install on that phone... the software problem is currently the biggest

Err what? It's just one app...

They could abandon Here Maps and simply use Bing Maps.
Since their mapping dept is hemorrhaging money, I don't see any reason to keep throwing more into that pit.

They're probably amortizing the cost of acquisition . The maps division might be doing great on sales, but instead of taking a huge hit in a single quarter, they could be taking eight smaller hits in eight consecutive quarters. You'd have to read the details to find out for sure, but this scenario is typical.

Skwerl said,
They're probably amortizing the cost of acquisition . The maps division might be doing great on sales, but instead of taking a huge hit in a single quarter, they could be taking eight smaller hits in eight consecutive quarters. You'd have to read the details to find out for sure, but this scenario is typical.

That's a very good point.

Astra.Xtreme said,

They could abandon Here Maps and simply use Bing Maps.

The HERE division supplies the road maps for Bing. Thus, if they abandoned HERE Maps, there would be no Bing Maps.

Just keep going, a nice boost in sales in each quarter and the phone business will bring in the profits soon. Though it seems the mapping division posted the majority of the loss in the quarter. Still, I think analysts where a bit optimistic, going with 8million, I was expecting 7-7.2million personally so I'm glad. Now to see If they can hit 9-9.5million in Q3.

I see them turning around soon, especially with the market saturation with the iPhone and gimmick turn out of the S4. Users are looking for something new. I personally am going after iPhone 5S. Maybe when I get bored I will switch to WP in 2015.

I've only seen three Windows Phone users here in Australia... The iPhone still dominates. DOMINATING!

iPhone? Who is buying that thing anymore... it is at least 2 generations behind in hardware and 5 generations behind in software...

Around 3 years ago, all you saw here was iPhones. Now everyone I know either has a Galaxy/Note or a Lumia, with a couple HTCs in between. iPhones used to be fashion statements. Now putting them aside a Galaxy S4 or a Lumia 920, it just feels so smallish and 2005.

68k said,
I've only seen three Windows Phone users here in Australia... The iPhone still dominates. DOMINATING!

Don't know where you live in Oz, but here in Melbourne I can see a lot more Lumias in my office. Telstra has replaced all their candybar business phones with Lumia 520s. Expect to see a lot more of the Lumias.

Skwerl said,
Ah, so Australia is stuck in 2009. That's cute. Dominating!

No, it's stuck under the reality distortion field. The majority of people have the iPhone 5.

Many of my friends (past iPhone users - non-technical type) want to exchange their new handsets for an iPhone a few days after purchase.

Seriously, I don't know what it is, but people just go for an iPhone. Perhaps it's because there's just one "iPhone", not 10 different models like with Lumias (confusing non-technical people).

Or perhaps it's because the iPhone has such a great reputation amongst consumers.

(I personally use an Android device.)

Edited by 68k, Jul 19 2013, 3:40am :

Sounds like they would have almost made a profit if they hadn't gone into the map business. I wonder how important the free maps are to those who purchase a Lumia. Its an important factor for me but I wonder if its worth it for Nokia.

Here drive+ is only free for the high end nokias, every other windows Phone (include the nokia 520) have to pay to use it. So they might start making some money from that

XerXis said,
Here drive+ is only free for the high end nokias, every other windows Phone (include the nokia 520) have to pay to use it. So they might start making some money from that

Nokia sells Here Maps, for a cost, to the automotive industry (i.e. in-dash units). That's where the bulk of their revenues come from.

Sure, but my response was in reaction to Ronnet saying that HERE is free for all nokia users, which is only true for parts of the suite unless you have a highend Phone.

Ronnet said,
Sounds like they would have almost made a profit if they hadn't gone into the map business. I wonder how important the free maps are to those who purchase a Lumia. Its an important factor for me but I wonder if its worth it for Nokia.

it is not worth the nokia but it is one fact that makes me think - why should i buy something else

XerXis said,
Here drive+ is only free for the high end nokias, every other windows Phone (include the nokia 520) have to pay to use it. So they might start making some money from that

That's only a recent think though. Nokia have offered free offline mapping & turn-by-turn navigation to all there smartphones until the Drive+. So, until recently, even the lower end Nokia smartphones including this free with Nokia/Ovi/Here Maps.

XerXis said,
Here drive+ is only free for the high end nokias, every other windows Phone (include the nokia 520) have to pay to use it. So they might start making some money from that

It used to be free. While I didn't know it got a pricetag, the operating loss comes from the past devices from the period when it was free. So I guess Nokia answered my question. Free navigation isn't worth it for Nokia.

Ronnet said,

It used to be free.

HERE Drive is free. (In some sense, Microsoft pays for it, as it is available on non-Nokia phones.)

HERE Drive Plus costs money.

Salem874 said,
You may just need to wave your phone about a bit. I'm sure i had a similar issue on my Nokia N8

No, it doesn't work without a compass. 520 doesn't have one.

Like this kind of things. The return of Nokia, after rescurration and the exclusive turnabout. But seriously the market needs more competitions. A step forward.

Scroogled said,
A decrease in margins is fine if the revenues are increasing.

Gross margins in the smartphone area is up though. 21.1% in Q2 compared to 20.7% in Q1. It looks to me like the HERE mapping part of the company is the one losing the majority of the money this quarter.

GP007 said,

Gross margins in the smartphone area is up though. 21.1% in Q2 compared to 20.7% in Q1. It looks to me like the HERE mapping part of the company is the one losing the majority of the money this quarter.

Yup. Nokia is still amortizing the cost of the NAVTEQ acquisition. That amount will eventually go off the books.

Scroogled said,

Yup. Nokia is still amortizing the cost of the NAVTEQ acquisition. That amount will eventually go off the books.

They also have to account for buying the other half of the network business from siemens to.

that means windows phone sold approximately 9 million this quarter. to put things into perspective, iphone is estimated to sell 25 million the same quarter. if,for comparisons sake, say that apple kept their 18.5% worldwide marketshare number, that would mean windows phone would be in the 6%-7% worldwide marketshare area.

Their phone division lost $33 million - down from about $700m a year ago. So it wont be long before they make money. Maybe next quarter even.

Neobond said,
That's what I meant, there's only one more quarter after this

Well if Q3 sees the same growth that Q2 saw then selling 9+ million should actually bring in a profit, their margins on smartphones has went up in Q2 compared to Q1, but only a bit, 21.1% in Q2 compared to 20.7% in Q1. So they're making more per Lumia at least.

NoClipMode said,
Their phone division lost $33 million - down from about $700m a year ago. So it wont be long before they make money. Maybe next quarter even.

Where does $33 million come from?

eddman said,
They actually made a non-IFRS profit of 303 million euros, whatever that means.

International Financial Reporting Standards , basically before they put their books in order the way the IFRS says they have to be they would have shown a 303million profit. It's basically accounting guidelines/policies and depending on how you report things in your business it can show a loss or a profit.

GP007 said,

International Financial Reporting Standards , basically before they put their books in order the way the IFRS says they have to be they would have shown a 303million profit. It's basically accounting guidelines/policies and depending on how you report things in your business it can show a loss or a profit.

Yep. They report these (non-IFRS) numbers to show underlying profitability, when you ignore things like the amortized cost of acquiring NAVTEQ, and other intangible asset amortizations.