Corporate Performance Management

Corporate Performance Management

July 21, 2011

Nokia Posts Massive Second Quarter Loss, Slips Behind Apple in Smartphone Lead

Banking on Microsoft’s (News - Alert) mobile software to help resuscitate its ailing smartphone business has set Nokia back, at least for the short term. The Finnish handset maker reported dismal second quarter results on Thursday as it handed its lead in the global smartphone race over to rival Apple (News - Alert).

Nokia posted a massive loss of around $692 million on revenues of approximately $13.2 billion. Handset sales were down 11 percent from the previous quarter and 7 percent from the same period of last year, when Nokia banked around $400 million in operating profit.

The company’s decision to phase out its Symbian (News - Alert) OS and hand over its mobile software responsibilities to Microsoft led to a 33 percent drop in smartphone sales. Overall, Nokia sold 16.7 million smartphones in the second quarter, falling well behind Apple, which shipped over 20 million iPhones in Q2, says Reuters (News - Alert).

A drop in smartphone sales was expected – as most Nokia fans are waiting for the Windows Phone 7 models to roll out – but it still marks a stunning fall from grace for the former market leader. Nokia’s estimated smartphone market share has fallen from around 24 percent to just 15 percent in only three months, said blogger and former Nokia employee Tomi Ahonen.

Nokia’s second quarter would have been even worse if it weren’t for the $600 million in intellectual property royalties that it received. In all likelihood, the sum came from the bulk payment that Apple was forced to send to Nokia for licensing fees on past use of its mobile technology.

Without the balloon payment, Nokia would have suffered more than a $1 billion loss in the last three months alone.

“The results were saved by the royalties,” Michiel Plakman, a fund manager at Robeco Group in Rotterdam, told Bloomberg. “Other than that it’s still very weak.”

Nokia chief executive Stephen Elop admitted that the quarter was disappointing, but claimed that the company’s “unwavering commitment to making the changes necessary at Nokia is the right way to deal with the disruptive forces in our industry.”

Nokia shares didn’t take much of a hit due to a positive forecast for the company’s handset business in the third quarter.

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Beecher Tuttle is a TMCnet contributor. He has extensive experience writing and editing for print publications and online news websites. He has specialized in a variety of industries, including health care technology, politics and education. To read more of his articles, please visit his columnist page.

Edited by Jennifer Russell


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