Nokia's (NYSE:NOK) overall handset business reported a drop in sales for the fourth quarter and the company posted weaker smartphones sales in the period than it did in the third quarter, a troubling sign since the holiday season is typically the strongest for smartphone makers. The earnings come just as Microsoft (NASDAQ:MSFT) is finalizing a $7.4 billion deal to take over Nokia's devices business and underscore the challenges Microsoft will face as a hardware maker.
Nokia reported that it shipped 8.2 million Lumia smartphones running Microsoft's Windows Phone software in the fourth quarter, down from the 8.8 million units it shipped in the third quarter of 2013. Nokia did not initially report the number but subsequently did so after its earnings were released, according to multiple news outlets.
As The Verge noted, the 8.2 million Lumia sales are an 86 percent jump from the year-ago period, and Nokia's 30 million Lumia sales in 2013 indicate the firm more than doubled the 13.3 million Lumias it sold during all of 2012.
However, the weak showing in the fourth quarter likely dampens Nokia's official exit from the hardware business. Microsoft expects the deal to close this quarter. For the Nokia smartphone business to simply break even, it will have to sell 50 million smartphones per year, Microsoft said last year.
In the fourth quarter Nokia's devices business posted sales of $3.59 billion, a 29 percent drop year-over-year and down 4.5 percent from the third quarter. Nokia did not provide overall handset unit shipment volumes for the fourth quarter. The company said its non-smartphone handset sales "were affected by competitive industry dynamics, including intense smartphone competition at increasingly lower price points and intense competition at the low end of our product portfolio." Nokia said its smartphone sales "were affected by competitive industry dynamics including the strong momentum of competing smartphone platforms, as well as our portfolio transition from Symbian products to Lumia products."
Following the close of the Microsoft deal, Nokia's main business will be Nokia Solutions and Networks, or NSN, its network infrastructure unit. That unit posted a 22 percent decline in fourth-quarter sales. Click here for that story.
Nokia already makes the vast majority of Windows Phones sold worldwide. According to research firm Gartner, Windows Phone captured 3.6 percent of the global smartphone market, tiny compared to Android and iOS, but up from 2.3 percent in the year-ago period. Android had 81.9 percent of the global smartphone market in the third quarter.
Nokia scheduled a press conference for Feb. 24 at the upcoming Mobile World Congress trade show in Barcelona, Spain. There have been persistent rumors that Nokia is developing a smartphone running on a forked and modified version of Android aimed at the low end of the market. How or if that project develops once the Microsoft deal closes is pure speculation, but The Verge reported that, according to unnamed sources at Nokia, the company had been planning to launch the device at MWC.
- see this release
- see this The Verge article
- see this WSJ article (sub. req.)
- see this separate WSJ article (sub. req.)
- see this NYT article
- see this Business Insider article
- see this Engadget article
- see this The Verge article
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