Nokia announces Q2 2012 results – $1billion operating loss, sells 4 million Lumia smartphones

Nokia has announced its Q2 2012 earnings results with a $1 billion operating loss on $9.21 billion of net sales. It also announced selling 4 million units of its Windows Phone running Lumia smartphones as well as an increased volumes of mobile phones to 73 million units. However, Nokia’s Symbian smartphones sales have declined with only 6.2 million units done in this quarter. Nokia shipped 10.2 million smartphones in this quarter, a decline of 39 percent year-on-year and 14 percent from last quarter.
It also wrote-off $270 million worth of smartphone inventory for Lumia, Symbian and MeeGo smartphones, which indicates its smartphones are not really selling well. “The significant year-on-year and sequential decline in our Smart Devices gross margin in the second quarter 2012 was primarily due to the recognition of approximately EUR 220 million of allowances related to excess component inventory, future purchase commitments and an inventory revaluation related to our Lumia, Symbian and MeeGo devices. Increases or decreases to Smart Devices allowances may be required in the future depending on several factors, including future sales performance.”
The company expects the third quarter to be challenging as Symbian smartphones sales are expected to decline even further while Windows Phone 8 devices won’t be available to consumers

Nokia is taking action to manage through this transition period. While Q2 was a difficult quarter, Nokia employees are demonstrating their determination to strengthen our competitiveness, improve our operating model and carefully manage our financial resources.
We shipped four million Lumia Smartphones in Q2, and we plan to provide updates to current Lumia products over time, well beyond the launch of Windows Phone 8. We believe the Windows Phone 8 launch will be an important catalyst for Lumia. During the quarter, we demonstrated stability in our feature phone business, and enhanced our competitiveness with the introduction of our first full touch Asha devices. In Location & Commerce, our business with auto-industry customers continued to grow, and we made good progress establishing our location-based platform with businesses like Yahoo!, Flickr, and Bing. We continued to strengthen our patent portfolio and filed more patents in the first half of 2012 than any previous six month period since 2007. And, we are encouraged that Nokia Siemens Networks returned to underlying operating profitability through strong execution of its focused strategy.
We are executing with urgency on our restructuring program.  We are disposing of non-core assets like Vertu. We are taking the necessary steps to restructure the operations of the company, which included the announcement of a new program on June 14. Faster than anticipated, we have already negotiated the closure of the Ulm, Germany R&D site, and the negotiations about the planned closure of our factory in Salo, Finland are proceeding in a collaborative spirit.
We held our net cash resources at a steady level after adjusting for the annual dividend payment to our shareholders. While Q3 will remain difficult, it is a critical priority to return our Devices & Services business to positive operating cash flow as quickly as possible.
- Stephen Elop