The Windows Phone push is finally paying off
Nokia Oyj. (HEX:NOK1V) today reported [PDF] that after six quarters of losses, it is at last once again profitable, as predicted.
The Nokia of today is a different one from that of three or four years ago. The once sustaining backbone of feature phones is not gone -- Nokia remains a top player in this market -- but it is diminished, as Nokia no longer holds the top spot (that belongs to South Korea's Samsung Electronics Comp., Ltd. (KSC:005930)). And in the smartphone sector sales have shrunk to 6.6 million units -- nearly a third of what it was a year ago. And most importantly, the majority of those smartphones carry a third-party operating system, Windows Phone, which replaced the proprietary Symbian operating system that once drove Nokia's lineup.
The Windows Phone transition is nearing completion -- in Q4 2012 Nokia sold 4.4 million Lumia Windows Phones, while moving only 2.2 million Symbian phones.
Nokia overall posted a profit of €0.05/share ($0.07 USD/share) before tax, or about €202M ($269.0M USD) in total profit after tax. That's a huge difference from the €1.07B ($1.43B USD) that Nokia lost in Q4 2011. But revenue was also down, at €8.04B ($10.73B USD), slightly below the analyst expectation of €8.12B ($10.83B USD), and down from €10.01B ($13.36B USD).
Nokia Lumia 920
Nokia's sales of phones were down in almost every region, with the major exception of North America, which saw an incredible 270 percent year-to-year growth.
The new Nokia is much leaner than it once was following a series of layoffs and the leasing of its gleaming Finnish headquarters. The company made a major shift, announcing that it would be cutting its dividend for the first time since 1989. While that move may irritate investors, it should boost a now-profitable Nokia's cash-pile, which has dwindled amid the losses. Last year, despite the losses, Nokia still paid investors a dividend.
CEO Stephen Elop, a former Microsoft Corp. (MSFT) executive acknowledged that Nokia is still "moving through [a] transition," but enthuses, "We are very encouraged that our team’s execution against our business strategy has started to translate into financial results. Most notably we are pleased that Nokia Group reached underlying operating profitability in the fourth quarter and for the full year 2012."
The Nokia recovery is perhaps a hopeful sign for other struggling players like HTC Corp. (TPE:2498) and Research in Motion, Ltd. (TSE:RIM). But it should by no means be considered the norm; the recovery has come at a tremendous cost as the company has labored to reinvent itself as a smaller, more agile competitor.
One distinct advantage Nokia has over other struggling players its Nokia Siemens Networks joint venture, which sells telecommunications equipment. The NSN unit has continued to grow in revenue, even as the mobile devices unit has shrunk in revenue. While smartphones and mobile in general do seem to be turning the corner from a operating cost perspective for Nokia, the profitability was only achieved thanks to a strong performance from NSN.
Source: Nokia [PDF]
"Well, there may be a reason why they call them 'Mac' trucks! Windows machines will not be trucks." -- Microsoft CEO Steve Ballmer
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