Nokia’s Q1 Financials: $1.76 billion operating loss, sales down 40% with 11.9 million smartphones sold

Nokia has published its first quarter financial results for 2012, displaying a 1.34 billion Euro ($1.76 billion) operating loss, as net sales of mobile devices declined by 40% year-on-year, with smartphones taking a 51% hit over the past 12 months.

In it’s last quarter, Nokia’s net sales hit €7.35 billion ($9.65 billion) which was down 26% on its last quarter, with 11.9m smartphones and 82.7 million mobile devices sold. This was bad news for the company, as smartphone and mobile device sales dropped by 39% and 27% respectively from the previous quarter.

Year-on-year, net sales in China fell 70%, in Europe by 35% and sales in North America were down 34%. In the Middle East and Africa they dropped 32% and in the APAC regions, Nokia saw a 28% decline. This also meant that the company saw a 40% drop in net device sales.

The company had warned investors of lower-than-expected earnings in Q1, releasing an amended outlook for the key Devices & Services business unit, despite selling over 2 million Lumia phones in the first quarter of the year.

It said multiple factors negatively affected the unit ‘to a greater extent than it previously expected’. In particular, Nokia blamed declines in gross margins and ‘competitive industry dynamics’ (which means Apple and Android handset makers are continuing to making the company’s life difficult).

In today’s release, Nokia puts its losses down to “greater than expected competitive challenges and seasonality” with “reported losses also primarily driven by charges related to restructuring activities.”

Nokia CEO Stephen Elop commented on his company’s recent quarter, painting a grim story:

“We are navigating through a significant company transition in an industry environment that continues to evolve and shift quickly. Over the last year we have made progress on our new strategy, but we have faced greater than expected competitive challenges.

We have launched four Lumia devices ahead of schedule to encouraging awards and popular acclaim. The actual sales results have been mixed. We exceeded expectations in markets including the United States, but establishing momentum in certain markets including the UK has been more challenging.

It’s interesting to see that Elop points out that it has been difficult to establish momentum in the UK, especially given the fact that the company had originally focused the launch of its new Lumia 800 smartphone and subsequent Lumia 710 and Lumia 610 launches.

With 2 million smartphones sold, it’s still a massive way behind Apple and Samsung, after Apple reported nearly 20 times that figure in its last quarter (although it will be releasing updated sales figures next week).

Elop continues:

At the same time, the lower price tiers of our industry are undergoing a structural change, and traditional feature phones are challenged by full touch devices. As a result we are taking deliberate measures to continue to renew our Series 40 platform, and we plan to strengthen our line-up in Q2 2012. We are making investments in our Mobile Phones business unit aimed at addressing the gaps in our offering.

We have a clear sense of urgency to move our strategy forward even faster. We are pursuing step function changes by having launched the Lumia 610 and Lumia 900 in the first quarter, expanding market coverage, increasing advertising, introducing key customer-requested features and broadening our most successful go-to-market activities. At the same time, we have focused our efforts in the low-end of smartphones and feature phone asset to drive improved business results and conserve cash.

We are confident in our strategy and focused on responding urgently in the short term and creating value for our shareholders in the long term.”

Nokia says that the expansion of its Lumia portfolio to “cover higher and lower price points”, increasing its geographic reach to 45 countries and the launch of the Lumia 900 in April have been encouraging signs for the company.

Nokia also collected another 250 million Euro payment from Microsoft, but it hasn’t affected its overall performance as the company stares down the barrel following another dismal quarterly earnings report.