Nokia has released its second-quarter financials, detailing the challenges it faced during its strategic transformation to post a €487 million operating loss, a drop of €782 million in just one year.
The Finnish mobile giant saw overall net sales plummet 11% quarter-on-quarter and 7% year on year, to €9.275 billion as smartphone sales dropped 32% from the previous quarter to 16.7 million units. The company’s profits down 41% year on year with all mobiles down 20%.
Stephen Elop noted in the earnings report that Nokia has begun to “mitigate the impact” of the challenges faced at the company, making a positive impact on the overall health of the business. Elop says that Nokia needed to take action to reduce the inventory build-up in its first quarter (we assume from less-than-expected sales in those regions), amending its pricing structure worldwide and focusing its sales and marketing resources towards consumer retail interactions.
Elop notes that its Windows Phone plans will bring long-term opportunities for Nokia, with “concentrated product launches in specific countries, the addition of extra markets and launch partners set to aid the company when it launches its new devices.
The results are not surprising, those in the industry noting that Nokia should have expected a drop in profits because the company simply hadn’t launched new devices in its second quarter. Benedict Evans puts it eloquently:
Just FYI, Nokia results would have been IDENTICAL if they’d chosen Android or stick with Meego. No product this year.
As smartphone sales continue to increase, Nokia found its revenues propped-up by the performance of its featurephones, which accounted for 27% of its net sales, with smartphone sales contributing 26%.
With so much effort put into making sure its Windows Phone launch is a success, the company has taken a massive hit. If it doesn’t get launches in the final two quarters right, the company could find itself in a hole that could prove too difficult to climb out of.