Nokia Reports 2nd Quarter Results

by Tom Carlson | Thursday, Jul 19, 2012 | 501 views

Nokia (NYSE:NOK) this morning reported its second quarter 2012 results. Compared to the second quarter of 2011, sales were down 19% and the company’s net loss of $1.7 billion was over four times the prior year. Sales of smartphones fell sharply.

 However, this beat expectations and Nokia’s stock price rose on both the Finnish stock market and NYSE in pre-market trading.

 In the company’s press release announcing the results, Nokia’s CEO focused on sales of the company’s Lumia model, which uses a Windows operating system, and stated the release of Windows Phone 8 would be “an important catalyst for Lumia”. (Author’s note: Unfortunately, Windows Phone 8 won’t be compatible with current Lumia models.) He also commented on the company’s restructuring plan and made a positive statement about its preservation of cash.  As to the future, he expects the third quarter to be “challenging” for Nokia’s smart devices and commented on cost-cutting efforts.

 Nokia’s future does indeed look challenging. The smartphone industry is dominated by phones using Apple’s iOS and Google’s Android. And since the cost of making a smartphone is not drastically more than the cost of making a basic phone, there doesn’t seem to be a big future in the basic phone business.

 On the other hand, issues with both the first Lumia model and Window’s operating system hurt Nokia’s transition from its own, proprietary operating system. Perhaps the launch of Windows Phone 8 will be “an important catalyst for Lumia”, which along with cost cutting could have a dramatic impact on Nokia’s bottom line.  And Microsoft has the resources to help Nokia survive and even thrive.

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