Nokia (NYSE:NOK) has indicated that its third-quarter results, especially in its key devices and services unit, would be weak and that the quarter would be challenging. The question analysts are puzzling over is just how weak, and whether the company can continue the momentum behind its Lumia line of smartphones running Microsoft's (NASDAQ:MSFT) Windows Phone software.
Nokia reports its third-quarter earnings this Thursday and is expected to report a drop in overall smartphone sales and market share as it continues its transition away from Symbian as its primary smartphone platform and toward Windows Phone. Nokia has said that sales of Symbian phones have declined faster than expected, negating gains it has made with Lumia. The handset vendor, which lost its crown earlier this year as the world's largest headset maker by volume to Samsung Electronics, is trying to regain its footing in emerging markets through both low-end Windows Phone devices and its Asha family of touchscreen devices aimed at young people.
When Nokia reported its second-quarter results in July it said it expected its non-IFRS devices and services operating margin in the third quarter to be similar to the second-quarter 2012 level of -9.1 percent, plus or minus four percentage points. Nokia said the outlook was due to competitive industry dynamics negatively affecting its smartphone and handset units; consumer demand particularly related to its Lumia products and the macroeconomic environment. Further, Nokia indicated that the third quarter would be "a challenging quarter in Smart Devices due to product transitions."
Strategy Analytics analyst Neil Mawston told the AP that he expects Nokia to ship around 83 million devices, weaker than Samsung's expected 98 million. Mawston also said he expects Nokia's smartphone sales to dip to 8 million units in the quarter, down from 10.2 million in the second quarter. A key number to look for will be how many Lumias Nokia sold in the quarter. It sold 4 million in the second quarter, double what it sold in the first quarter.
"The window of opportunity is still open but the gap is getting smaller. Nokia has to show some signs that the Windows Phone portfolio can assist more in its recovery," Mawston said. "We think things are a little bit rosier for Nokia than they were because its feature phones division is showing signs of recovery and their Microsoft phones are growing quarter on quarter."
Nokia introduced two new Lumia smartphones, the 920 and 820, which AT&T Mobility (NYSE:T) will start selling in November. In addition, T-Mobile USA is going to launch the mid-range Lumia 810, and there have been rumors that Verizon Wireless (NYSE:VZ) will launch a similar Lumia device.
- see this AP article
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Correction, Oct. 17, 2012: This article has been revised to indicate that Nokia never issued a formal profit warning of any kind for the third quarter of 2012.