Nokia Swings Into Red In Q2 - Twice

Nokia Swings Into Red In Q2

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Espoo, Finland - Nokia swung into the red in its fiscal second quarter and first half.

The results were in large part due to a 20 percent second-quarter decline in sales of handsets and related services to 5.5 billion euros ($7.8 billion.)

 The company posted an operating loss of 487 million euros ($697.3 million) compared with a year-ago operating profit of 295 million ($422.3 million). The net loss came to 492 million euros ($704.3 million) compared with a year-ago net profit of 104 million euros ($148.9 million.)

The second-quarter losses offset first-quart net and operating profits to generate a first-half operating loss of 48 million euros and a first-half net loss of 261 million euros. Net sales, nonetheless, were up almost 1 percent to 19,674 million euros, including the company's wireless- infrastructure and Navteq map software businesses.

The company's handset business posted a second-quarter operating loss of 247 million euros compared with a year-ago operating profit of 643 million euros.

The company blamed the abrupt drop in handset sales in part to carriers and distributors that cut back purchases to reduce first-quarter inventories, which Nokia said ended the second quarter at the midpoint of the company's normal four- to six-week range.

Nokia also blamed sequential and year-over-year declines in smartphone sales to "the strong momentum of competing smartphone platforms relative to our Symbian devices, particularly in Europe and China, as well as pricing tactics by certain competitors," a statement said. Sequential and year-on-year declines in other mobile phone sales were the result in part to a lack of dual-SIM phones until late in the second quarter. Dual-SIM phones are posting growth in markets outside the U.S.

The company didn't blame component shortages for its sales declines, as Sony Ericsson did in its most recent quarter, saying its Japanese suppliers recovered faster than expected from the Japan earthquake and it shifted component purchases to facilities unaffected by the earthquake.

Nokia's handset sales accounted for 59 percent of total sales of the quarter's 9,275 million euros, which were down 7 percent for the quarter but up almost 1 percent for the half because of a first-quarter 9 percent gain.

The company is in the middle of a structuring and a repositioning to focus its smartphone efforts on the Windows OS, and the challenges in executing this "strategic transformation" have "manifested in a greater than expected way" in the second quarter, Nokia CEO Stephen Elop said in a prepared statement. "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."

He also said the company is continuing its smartphone transition to focus on Windows-based smartphones and that "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."

In other matters, Elop said the company plans expense reductions deeper than the previously announced target of 1 billion eruos in its handset business for 2013. The company didn't mention a specific amount.

North America, the company's lowest volume region, posted a sales decline of 5 percent, to 467 million euros.

Currency conversions were calculated at a rate of 1 euro equaling $1.43.

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