Finnish mobile giant Nokia has announced its latest quarterly financials, and they show a company in freefall with a reported operating loss of €487 million.
The staggering figure is based on sales of €9.275 billion, which compares unfavourably with sales of €10.003 billion in Q2 of 2010 as customers hold off on buying devices in order to see what Nokia's partnership with Microsoft on Windows Phone devices will bring.
That eye-watering loss is largely due to the company's poor showing in the smartphone market as Symbian and MeeGo lose ground to iOS, Android, and Windows Phone. Year-on-year, the company has seen smartphone sales drop 32 per cent and mass-market mobile sales drop 20 per cent, while Nokia's overall net sales have dropped a shocking 23 per cent in the last quarter alone.
Nokia Siemens Networks, the company's telecommunications equipment arm, is the only section of the company to have shown a growth year on year, enjoying a 20 per cent increase in net sales from Q2 2010. Sadly, increased costs have lead to a 22 per cent dip in operating profit due largely to an issue where no tax benefits are recognised for certain NSN deferred tax items.
"The challenges we are facing during our strategic transformation manifested in a greater than expected way in Q2 2011," admitted a subdued Nokia chief Stephen Elop during the company's financial briefing session. "However, even within the quarter, I believe our actions to mitigate the impact of these challenges have started to have a positive impact on the underlying health of our business.
"During this time of transition, we expect competitive pressures to continue," Elop warned investors and shareholders. "However, we have a clear strategy to address the concerns about our product competitiveness. In Q2, both our Smart Devices and Mobile Phones business units moved forward on their plans.
"In Smart Devices [smartphones], those who already have viewed our early Windows Phone work are very optimistic about the devices Nokia will bring to market and about the long-term opportunities. Step by step, beginning this year, we plan to have a sequence of concentrated product launches in specific countries, systematically increasing the number of countries and launch partners."
Elop also claimed that accelerated plans for expense reductions will mean the company will have shed around €1 billion in expenses for the full year of 2013, although failed to detail exactly how such savings will be achieved without wide-ranging job losses.
"While our Q2 results were clearly disappointing," Elop admitted, "we are executing well on the initiatives that are most important to our longer term competitiveness. Some progress is already evident, and thus we are targeting to end this year with more net cash and liquid assets than at the end of Q2 2011. We firmly believe that our deliberate and unwavering commitment to making the changes necessary at Nokia is the right way to deal with the disruptive forces in our industry and drive value creation for our shareholders."
The poor showing in Q2 has left the company with €3.891 billion net cash and other liquid assets to its name, down from €6.372 billion last quarter. Clearly, Nokia is betting heavily on its first Windows Phone device - codenamed Sea Ray - but if it doesn't get it out of the door quickly, it could find its investors looking to jump ship.