Nokia reports drop in mobile sales ahead of Microsoft handover

Agence France-Presse

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Nokia's devices and services unit -- the operations it has agreed to sell to Microsoft -- recorded net sales of 2.6 billion euros ($3.6 billion) in the fourth quarter of last year

DECLINING GIANT. An exterior of Nokia's headquarters in Espoo, Finland 3 September 2013. EPA/Markku Ojala

HELSINKI, Finland – Fallen Finnish telecom star Nokia unveiled Thursday, January 23, a steep drop in sales of the handset business that it is to soon hand over to Microsoft.

The fourth-quarter results provided what was likely a last glimpse of the health of its mobile business before finalising the deal with the US technology giant.

Nokia’s devices and services unit — the operations it has agreed to sell to Microsoft — recorded net sales of 2.6 billion euros ($3.6 billion) in the fourth quarter of last year, down 29 percent from the same quarter the year before.

The devices and services business also saw an operating profit of 97 million euros in the fourth quarter of 2012 transformed to an operating loss of 198 million euros in the fourth quarter of 2013.

Sales of smart devices, primarily the Windows-based Lumia devices, took a hit in the fiercely competitive market for smartphones.

“Our smart devices net sales were affected by competitive industry dynamics including the strong momentum of competing smartphone platforms,” Nokia said in a statement.

Analysts said the quarterly figures were likely to be scrutinised closely for what they had to say about Microsoft’s chances of making it in the handset business.

“Microsoft bought the handset division, so of course they are interested in what shape they will get it,” said Sami Sarkamies, an analyst with Nordea.

“But the decision (to take over the handset business) has been made. Even if the fourth quarter has gone badly, there’s no stepping back.”

For the full year 2013, Nokia’s devices and services unit reported sales of 10.7 billion euros, also a drop of 29 percent year-on-year.

Furthermore, Nokia expects the devices and services business to “generate a negative operating margin” in the first quarter of 2014, the Finnish company said in the statement.

Spectacular fall

The struggling Finnish company’s plan to sell the handset business to Microsoft for 5.4 billion euro was announced in early September.

The sale of the assets, which include the Lumia smartphone trademark and technology, must take place in early 2014.

Once the world leader in mobile phones, Nokia has experienced a spectacular fall in sales since the arrival of Apple’s touchscreen iPhone in 2007.

“What (Microsoft) will want to see is what demand and market share Nokia currently has in the world and how popular the devices are against other rivals,” said Ishaq Siddiqi, an analyst at London-based ETX Capital.

“I think it’s more of a symbolic gauge of what Nokia still means in the smartphone world and what Microsoft can take from there, and then take it apart and make it better.”

Nokia’s interim chief executive, Risto Siilasmaa, described the end of 2013 as a “watershed moment in Nokia’s history.”

“I am pleased with the progress we have made thus far in our strategy evaluation and excited by the opportunities ahead,” Siilasmaa said in a statement, which added that the new slimmed-down company was “more focused, more innovative and more disciplined.”

Meanwhile, Jonas Olavi, a Stockholm-based analyst with Nordea bank, argued the mobile phone figures “shouldn’t mean that much to Microsoft”.

“You shouldn’t read in too much into that on behalf of Microsoft because they are in a phase of adding new phones,” he said.

“I think it’s a migration between the new phones coming into play… but it takes some time before you get some momentum,” he said.

Nokia’s overall year-on-year sales, not including the handset business, fell 17 percent to 12.7 billion euros ($17.3 billion).

Nokia’s telecom services business, a former joint venture with Siemens known as NSN — which will now be the company’s mainstay — reported an 18-percent decline in sales to 11.3 billion euros in 2013.

However, NSN managed to turn a 795-million-euro operating loss in 2012 into an operating profit of 420 million euros in 2013. –

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