|Nokia CEO to 'Deeply' Discount Lumia Phones |
By SVEN GRUNDBERG STOCKHOLM—The chief of Nokia Corp. said sales of its new Lumia smartphones have been mixed and he will "deeply" discount the devices to spur sales to compete with Asian rivals in emerging markets.
The Finnish company said its operating loss for the three months to March 31 totalled $1.76 billion, from a $577 million operating profit a year ago, missing analysts' expectations for a $960 million loss by a wide margin. Dow Jones's Gren Manuel reports. Photo: Reuters
Bloomberg News Stephen Elop, chief executive of Nokia, speaks during a keynote event at the Mobile World Congress in Barcelona in February 2012.
Nokia CEO Stephen Elop said Lumia sales "exceeded expectations in markets including the United States, but establishing momentum in certain markets, including the U.K., has been more challenging."
Consumers are shunning basic Nokia phones and turning increasingly to cheap smartphones powered by Google Inc.'s Android mobile phone software that the Internet giant provides free to handset makers like Samsung Electronics Co.
"The price point of Android devices from a variety of manufacturers is quickly being pushed down," Mr. Elop said, adding there are gaps in Nokia's line-up of phones that it needs to fill swiftly.
"A very clear part of our strategy is to drive the prices of our Lumia devices deeply down, so we can compete effectively," Mr. Elop said, but he declined to specify exactly when Nokia plans to unveil new cheaper Lumia phones.
The moves were announced as Nokia reported heavy losses in the first quarter Thursday and said the executive in charge of its world-wide salesforce was leaving the company.
Colin Giles, a Nokia veteran who has been head of global sales since January 2010, will leave the company as it restructures its sales unit, "reducing a layer of sales management," Nokia said.
The Finnish company said its operating loss for the three months to March 31 totaled €1.34 billion ($1.76 billion), from a €439 million profit a year ago, missing analysts' expectations for a €731 million loss by a wide margin.
Net loss was €929 million from a €344 million net profit for the same quarter last year, against expectations for a €554 million loss. Revenue dropped 29% to €7.35 billion.
Nokia warned last week that intense competition in fast-growing emerging markets would hit its performance in the first half of this year. Nokia is abandoning Symbian, its in-house phone operating software now considered by many to be clunky and old-fashioned, and is switching to Microsoft Corp.'s new Windows Phone software for its mobile handsets.
Nokia's first-quarter operating margin at its largest Devices & Services unit was a negative 5.2% according to IFRS accounting standards. Nokia said the margin, excluding special items, was negative 3% and it expects a similar or lower level in the second quarter.
The company has been struggling over recent years to compete in Western markets against Apple Inc.'s iPhone and smartphones from Asian manufacturers like Samsung and HTC Corp. Now the Finnish company's dominance in developing markets appears to be slipping.
The company said it shipped 82.7 million devices in total in the first quarter, down from 108.5 million devices the same quarter last year. Volumes in China fell 62%, North America fell 50% and Europe was down 32%.
Its smartphone shipments, which include its old range of Symbian devices as well as its new Windows-powered Lumia range, were at 11.9 million, down from 24.2 million a year ago. Average selling prices for smartphones declined 2% year-on-year to €143, while average prices for basic phones were at €33, down from €40 a year ago.
Given Nokia's steep fall in handset volumes, most observers are now expecting rival Samsung to overtake Nokia's spot as the largest maker of mobile phones, in terms of volumes, in the first quarter.
According to technology research firm Gartner, Nokia had a 23.4% market share for mobile phones in the fourth quarter last year, when it sold 111.7 million handsets. Samsung sold 92.7 million handsets, giving it a 19.4% volume market share.
Nokia announced close to 14,000 job cuts last year in a bid to erase €1 billion from its operating costs by 2013. It hasn't ruled out further cuts and on Thursday it said it plans to accelerate and substantially deepen cost savings for its Devices & Services unit and will give further details soon.
Write to Sven Grundberg at email@example.com