Finnish handset maker Nokia Corp. (NOK: Quote) on Thursday reported a hefty loss for the first quarter, tied down by one-off items as well as a sharp decline in sales, amid a customer shift to less expensive smart phones. Separately, the company said its sales chief is leaving for personal reasons.
Commenting on the results, Stephen Elop, Nokia CEO, said, "We are navigating through a significant company transition in an industry environment that continues to evolve and shift quickly. Over the last year we have made progress on our new strategy, but we have faced greater than expected competitive challenges."
The company, which has been implementing a cost cutting strategy for a turnaround, reported a loss attributable to equity holders of the parent of 929 million euros or 0.25 euros per share, compared to a profit of 344 million euros or 0.09 euros per share in the prior year.
During the quarter, Nokia incurred charges totaling 1.08 billion euros, including a 772 million euros restructuring charge related to Nokia Siemens unit. The company recognized net charges of 91 million euros related to restructuring activities in its Devices & Services business.
On a non-IFRS basis, loss was 0.08 euros per share in comparison with a profit of 0.13 per share euros last year.
Reported net sales declined to 7.35 billion euros from 10.4 billion euros in the prior year with declines across all geographical areas.
During the quarter Nokia faced competition from more affordable smartphones as well as feature phones with broader portfolios, which hurt its business in several key markets.
Sales in Europe declined 25 percent to 2.36 billion euros, while Asia-Pacific sales dropped 21 percent to 1.83 billion euros. There was a pronounced impact in China as competitive industry dynamics hurt both Mobile Phones and Smart Devices net sales in the Dragon Nation.
In the Devices & Services segment, net sales dropped 40 percent to 4.25 billion euros owing to a 52 percent decline in sales of Smart Devices and a 32 percent drop in sales of mobile phones. Nokia had slashed its devices & services unit outlook last week.
Mobile device volume dropped 24 percent to 82.7 million units. Average selling price dropped 22 percent to 51 euros.
Sales dropped 7 percent in Nokia Siemens Networks, driven primarily by a decline in sales of infrastructure equipment, which more than offset a slight increase in sales of services.
Nokia said sales results for the new Lumia devices have been mixed. "We exceeded expectations in markets including the United States, but establishing momentum in certain markets including the UK has been more challenging," Elop said.
Nokia said it is taking measures to renew its Series 40 platform and plans to strengthen the line-up in the second quarter.
The company expects its non-IFRS Devices & Services operating margin in the second quarter to be similar to or below the first quarter level of negative 3 percent.
Nokia continues to target to reduce Devices & Services non-IFRS operating expenses by over 1 billion euros for 2013, compared to full year 2010 Devices & Services non-IFRS operating expenses of 5.35 billion euros.
The company plans to accelerate and deepen Devices & Services cost savings and will announce further details later.
Separately, Nokia said Colin Giles, executive vice president of sales and a member of the Nokia Leadership Team, would step down from his positions, effective June 30. After several years of travel, Giles has decided to leave the company on to be closer to his family, the handset maker said.
Nokia will restructure the sales organization by reducing a layer of sales management, providing senior leaders greater visibility into market dynamics. Effective immediately, Nokia's four regional senior vice presidents and the lead of sales operations will report directly to Niklas Savander, executive vice president of markets.
Nokia shares are currently down 1.9 percent in Helsinki at 2.97 euros on a volume of 32.38 million shares.
In pre-market trading on the NYSE, NOK is down about 1 percent at $3.94.
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by RTT Staff Writer
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