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+ Finnish Mobile Phone Giant Reports Forth Quarter Results

26 January 2012

The Finnish Mobile Phone Giant Has
Reported Quarterly Loss on Impairment Charges

Stephen Elop, Nokia As expected, The Finnish mobile phone giant has reported its fourth-quarter resuults with a net loss of EUR1.07 billion (US$1.4 billion) for the fourth-quarter of the year as revenues also fell by 21% to EUR10 billion (US$13 billion). The company dropped into a loss due to a EUR1.1 billion impairment charge at its location services division.

Smartphone sales dropped by 23% compared to a year ago, but by less than analysts had expected.

Nokia's CEO, Stephen Elop commented: "The fourth quarter of 2011 marked a significant step in Nokia's transformation. Most notably, in Q4 we introduced new mobile phones and smartphones, which resulted from the strategy shift in our Devices & Services business.

Overall, we are pleased with the performance of our mobile phones business, which benefited in Q4 from sequential double-digit percentage growth in our dual SIM business, with particular strength in India, Middle East and Africa and South East Asia. In October, we introduced the Asha 200, 201, 300 and 303, which brought new mobile phones into 76 markets around the world. We are building on this foundation with R&D investments as we continue our journey to connect the next billion to the Internet.

Also in October, just six months after signing an agreement with Microsoft, we introduced our first two devices based on the Windows Phones platform - the Nokia Lumia 800 and the Nokia Lumia 710. We brought the new devices to market ahead of schedule, demonstrating that we are changing the clock speed of Nokia. To date, we have introduced Lumia to consumers in Europe, Hong Kong, India, Russia, Singapore, South Korea and Taiwan.

We have also started our important re-entry into the North American market. Earlier this month, T-Mobile started selling the Nokia Lumia 710 as a lead device. We also announced the new Nokia Lumia 900 with AT&T, and immediately received a number of industry awards. The Nokia Lumia 900 is our third Lumia device, our first LTE device designed specifically for the North American market, and AT&T is positioning the Lumia 900 as a lead LTE device.

In the war of ecosystems, clearly there are some strong contenders already on the field. And with Lumia, we have demonstrated that we belong on the field. Our specific intent has been to establish a beachhead in this war of ecosystems, and country by country that is what we are now accomplishing. To date we have sold well over 1 million Lumia devices. From this beachhead of more than 1 million Lumia devices, you will see us push forward with the sales, marketing and successive product introductions necessary to be successful. We also plan to bring the Lumia series to additional markets including China and Latin America in the first half of 2012.

And, while we progressed in the right direction in 2011, we still have a tremendous amount to accomplish in 2012, and thus, it is my assessment that we are in the heart of our transition.

Specifically, changing market conditions are putting increased pressure on Symbian. In certain markets, there has been an acceleration of the anticipated trend towards lower-priced smartphones with specifications that are different from Symbian's traditional strengths. As a result of the changing market conditions, combined with our increased focus on Lumia, we now believe that we will sell fewer Symbian devices than we previously anticipated.

During Q4, we also formed the Location & Commerce business to drive value from our leading mapping and location-based services platform. We conducted annual impairment testing in Q4 in the context of our new structure and plans for the future, and valued the Location & Commerce business at EUR 4.1 billion, resulting in an impairment of goodwill of EUR 1.1 billion. The Location & Commerce business is an important asset that is bringing differentiating location-based services to Nokia, the Windows Phone ecosystem, and other Microsoft products such as Bing. We believe this is the leading location-based services platform with an opportunity to become tremendously powerful as computing goes more mobile, and location increasingly becomes a critical organizing dimension for a person's experiences.

In summary, with a strong balance sheet, our performance in mobile phones and the new excitement around Lumia, we are confident that we are on the right track to build long-term value."

Devices

In the fourth quarter 2011, Nokia received the first quarterly platform support payment of US$250 million from Microsoft. It in turn will have made unspecified payments for the Windows Phone OS licenses and support services.

On a year-on-year basis, the decline in total Devices & Services volumes in the fourth quarter was driven by significantly lower Smart Devices volumes. Mobile Phones volumes were approximately flat year-on-year, although increased availability of dual-SIM phones helped sales volumes in the final quarter of the year.

Sales Volumes by Region

Million units Q4 2011 Q4 2010 YoY Change Q3 2011 QoQ Change
Europe 25.3 33.5 -24% 20.7 22%
Middle East & Africa 25.9 22.2 17% 26.0 0%
Greater China 14.7 21.9 -33% 15.9 -8%
Asia-Pacific 34.7 31.3 11% 32.4 7%
North America 0.5 2.6 -81% 0.7 -29%
Latin America 12.4 12.2 2% 10.9 14%
Total 113.5 123.7 -8% 106.6 6%

Nokia Siemens Networks

The year-on-year decrease in Nokia Siemens Networks' net sales in the fourth quarter 2011 was driven primarily by a decline in sales of infrastructure equipment, which more than offset the contribution from the acquired Motorola Solutions networks assets and a slight increase in sales of services.

Excluding the acquired Motorola Solutions networks assets, net sales would have decreased by 11% year-on-year. The sequential increase in Nokia Siemens Networks' net sales in the fourth quarter 2011 was driven primarily by industry seasonality. Services represented slightly over 50% of Nokia Siemens Networks' net sales in the fourth quarter 2011.

At constant currency, Nokia Siemens Networks' net sales would have decreased 5% year-on-year.

Outlook

Looking forward, Nokia expects its non-IFRS Devices & Services operating margin in the first quarter 2012 to be around breakeven, ranging either above or below by approximately 2 percentage points

The company refused to offer a full-year guidance due to the uncertainties in its market and the ongoing transition within the business.



Nokia Connecting People
Source: Nokia Press Author: Teo


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