Analysts see Nokia's Q3 feature phone sales as bright spot amid smartphone troubles

Nokia's sixth consecutive quarterly loss gave analysts a glimmer of hope after the company delivered stronger-than-expected sales of its low-cost Asha handsets.

Nokia CEO Stephen Elop


"The ship is sinking slower than before, which gives Nokia some time to turn around its smartphone business," Hakan Wranne, an analyst at Swedish banking group Swedbank, told MarketWatch

What also caused less panic among Nokia watchers was an unexpected boost from its Nokia Siemens Network (NSN) joint venture, which posted a €182 million operating profit in the quarter, up from a €114 million loss a year earlier.

Mikko Ervasti, an analyst at the Finnish Evli Bank, described NSN's third-quarter performance as "incredible," according to the MarketWatch.

Nokia beat analyst forecasts (€6.93 billion) for its third-quarter with sales of €7.24 billion, albeit well below the same quarter last year when it reported sales of €8.98 billion. However, losses increased in the quarter reaching €969 million, compared with a €68 million loss in the same quarter a year ago. Further, Nokia's reserves have also continued to decline, reaching €3.6 billion at the end of September, down from €4.2 billion at the end of June.

Nokia CEO Stephen Elop said the cash burn was largely caused by restructuring efforts. "It's one of those ironies," Elop told Dow Jones Newswires. "The faster you move through restructuring, the faster the use of cash is. But it's all for the help of the business, so in essence it's a good thing."

Overall, Nokia said it shipped 82.9 million phones in the third quarter, down slightly from the 83.7 million phones it sold in the second quarter, but down 22 per cent from 106.6 million in the year-ago period. The bulk of Nokia's sales are low-end phones in emerging markets.

Reviewing Nokia's third-quarter performance, analysts concluded that Nokia had a bright spot with its Asha phones and lower-end handsets, but that it still faces enormous challenges in regaining its footing in smartphones, according to Reuters.

"While their smartphone division is struggling their feature phone division is doing OK, but feature phones are a sunset technology and smartphones are sun rising, so they need to transfer growth to the sun rising technology," noted  Strategy Analytics analyst Neil Mawston.

Gartner analyst Carolina Milanesi said: "Mobile phones were good, but this was the only place to look for good news. Nothing good could have come from smart devices as there were no new products."

"Nokia has never been more reliant on its mobile phone business," CCS Insight analyst Geoff Blaber said. "Success with Windows Phone remains as dependent on the continued success of Series 40 as it is on Microsoft."

To illustrate the smartphone hill that Nokia has to climb, the Financial Times noted that Nokia sold fewer of its flagship Lumia Windows Phone smartphones in the third quarter (2.9 million) than Apple did for the opening weekend of the iPhone 5 in September, when it sold 5 million iPhones.

For more:
- see this Nokia release
- see this Financial Times article (sub. req.)
- see this Reuters article
- see this Market Watch article
- see this Bloomberg article

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