Nokia's catastrophe continues with huge Q2 loss


Nokia CEO Stephen Elop put a brave face on the company's prospects for the future and its appalling second quarter results--a net loss of €368 million.

While admitting that the quarter was "disappointing," an understatement of some magnitude, Elop maintained that Nokia is making good progress with its new strategy and is starting to see a "positive impact on the health of the company."

Quite what this "positive impact" is remains unclear. Almost everywhere you look Nokia is struggling to keep its head above water. Some observers even believe the company will suffer further ignominy when it falls to No. 3 in smartphone shipment rankings once Samsung gains second place behind Apple.

With its handset business in tatters, Nokia was also damaged by its Navteq mapping division reporting a quarterly loss of €58 million, while the unloved Nokia Siemens Networks provided no comfort with a loss of €111 million.

With this sorry picture, industry analysts are increasingly puzzled as to how Elop can succeed in turning around Nokia.

IDC's research manager for European mobile devices, Francisco Jeronimo, believes it will take at least two or three quarters after Nokia launches its first Windows Phone handsets before the company will see positive results from its partnership with Microsoft.

This means it'll be almost a year before we can gauge whether Elop's gamble is starting to produce results. By this time the smartphone world will have turned several revolutions and the Windows Phone platfrom will be available on many handsets from a wide range of vendors aggressively looking to gain market share.

Equally worrying is Elop's plan to introduce up to 10 new Symbian products over the next few months. Why would customers want to purchase handsets based upon this operating system given that Symbian is a dead-end technology?

Where the CEO might find greater acceptance, at least with the financial community, is with his plan to exceed the level of operating expense cuts--already set at €1 billion by 2013--by slashing back on subcontracting, IT spend and staff travel.

What Elop desperately needs is time. But, unfortunately, the cell phone business continues to gain pace which will leave him with few options to fix the company and set it on a viable path to ensure its survival.--Paul

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