UPDATED: Nokia ships more than 1M Lumia smartphones, but reports $1.4B loss in Q4

Nokia (NYSE:NOK) said it has shipped more than 1 million Lumia smartphones running Microsoft's (NASDAQ:MSFT) Windows Phone software to date. The phones first became available in November and CEO Stephen Elop said he is encouraged by consumer reception to the devices. Nevertheless, Nokia posted a $1.4 billion loss in the fourth quarter and reported a 21 percent drop in sales.

The Finnish vendor reported a net loss of $1.4 billion in the quarter, down from a profit of $979 million in the year-ago period. Since Nokia officially formed its location and commerce business in the fourth quarter and valued it at $5.39 billion, the company booked a goodwill charge of $1.44 billion. Nokia's board also nominated entrepreneur Risto Siilasmaa to succeed Jorma Ollila as chairman of the company.

Overall, net sales fell 21 percent to $13.1 billion, down from $16.6 billion in the year-ago period. In the company's key devices and services business, sales fell 29 percent in the fourth quarter to $7.8 billion. Nokia shipped a total of 113.5 million handsets in the fourth quarter, down 8 percent form 123.7 million in the year-ago period. The company also shipped 19.6 million smartphones, down 31 percent from 28.6 million in the fourth quarter of 2010, roughly in line with analysts' estimates, according to Reuters.

Nokia unveiled its Lumia phones, the 800 and the 710 in late October, and started shipping them in select locations in Europe and Asia shortly thereafter. In the United States, the company's 710 started selling this month through T-Mobile USA for $50 with a service contract, and AT&T Mobility (NYSE:T) is set to release the LTE-capable Lumia 900 sometime in the next few months.

Elop said during the company's earnings conference call that he is pleased with the market reception to its Lumia phones but said the company still has "a tremendous amount to accomplish in 2012 in order to position Nokia for long-term sustainable growth." He noted that the company had established "beachheads" in several markets, and will expand its Lumia lineup this year, including to China and Latin America in the first half. He said that the performance of the devices have varied market to market, and that while retail execution in the UK has been "mixed" due to the strength of Apple's (NASDAQ:AAPL) iOS and Google's (NASDAQ:GOOG) Android platform, the devices have fared better in Germany and Spain.

The Nokia chief said that carrier executives think having a strong third smartphone ecosystem is critical. He added that the company will work to increase the engagement of retail sales representatives, will seed more devices into the retail channel and is learning more about how to approach its marketing and brand awareness. He also said the company is adjusting its plans and will increase the rate of new Windows Phone product introductions.

Interestingly, Nokia said in the fourth quarter it received a $250 million payment from Microsoft for using Windows Phone, the first quarterly "platform support payment" Microsoft will make to Nokia. Nokia said it has a competitive software royalty structure, which includes minimum software royalty commitments. Nokia said that over the life of its agreement with Microsoft both the platform support payments and the minimum software royalty commitments are expected to measure in the billions of dollars.

For more:
- see this release
- see this WSJ article (sub. req.)
- see this NYT article
- see this Bloomberg article
- see this Reuters article

Special Report: Wireless in the fourth quarter of 2011

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Article updated Jan. 26 to reflect that Nokia said it has shipped more than 1 million Lumia phones "to date," and not in the fourth quarter.