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70

Nokia no longer a rotting apple, reports profit in Q4 earnings report

Nokia has finally managed to turn things around. The company has reported a profit of €439 million ($585 million), with €8.04 billion ($10.7 billion) in revenue. These figures were possible through stronger Lumia sales, Nokia Siemens Network and company restructuring. We believe Stephen Elop is currently cruising around with a megaphone, ensuring everyone hears the news.

The number of Lumia Windows Phones sold also saw an increase to 4.4 million, up from just 2.9 million in the previous quarter. We'd consider this as Nokia's most successful quarter since the company partnered with Microsoft and began supporting Windows Phone. As well as profit and sales, Nokia also increased its net cash reserves from €3.56 billion ($4.7 billion) to €4.36 billion ($5.8 billion).

While the bump in Lumia Windows Phone sales is a good thing, we cannot ignore the fact that this is not what's driving the company forward into sustainability. It's Nokia Siemens Network, a joint venture by both parties, which is contributing heavily to Nokia's income. It brought in $334 million, while Nokia's Device business contributed $367 million - including everything from Lumia to Asha.

Nokia also has an increased average selling price (ASP) of its smartphones, up from €140 ($186) the previous year to €186 ($248). This is due to the focus shift from low-cost Symbian hardware to premium Windows Phones - with some mid and low range devices to boot. 

While Q4 proved to be a solid end of 2012 for Nokia, the company experienced issues throughout the year. Thus, the company will not grant a dividend to shareholders as it continues to move back into the black. Stephen Elop had the following to the say about the quarterly results:

"We are very encouraged that our team’s execution against our business strategy has started to translate into financial results. Most notably we are pleased that Nokia Group reached underlying operating profitability in the fourth quarter and for the full year 2012.

While the first half of 2012 was difficult for Nokia Group, in Q4 2012 we strengthened our financial position, improved our underlying operating margin in Devices & Services, introduced the HERE brand to expand our mapping and location experiences, and drove record profitability in Nokia Siemens Networks.

We remain focused on moving through our transition, which includes continuing to improve our product competitiveness, accelerate the way we operate and manage our costs effectively. All of these efforts are aimed at improving our financial performance and delivering more value to our shareholders."

Outlook into 2013

So what does this year hold for Nokia? What's the company predicting for the first quarter? Nokia expects its Devices & Services division to go back into loss-making. This is predicted to be caused by competitive industry dynamics and more, but the company is hoping for Nokia Siemens Networks to take the blow with a positive operating margin (though we could well be looking at softened blow as opposed to turning it around).

We'll expect to see continuing difficult periods for Nokia, especially as Microsoft battles on to market Windows Phone. BlackBerry 10 will be upon us soon, which will provide more pressure on Elop and the gang to ship Lumias and get consumers on-board. But we shouldn't remain down about prospects or the future. We cannot forget that Nokia has actually reported profit.

Source: Nokia (PDF)

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Reader comments

Nokia no longer a rotting apple, reports profit in Q4 earnings report

70 Comments

WAY TO GO NOKIA!!! But still a lot more to do, and not a lot of time to get it done. I'm curious to see how BB10 will do. Make or break for RIM now.

Just think how many more Lumias would have sold had they not made the exclusivity deal with at&t on the 920.

Got to agree with you. But it's part of corporate warfare in order to get more customers. Competition will always be a dirty business no matter what.

And if Nokia didn't give AT&T the exclusivity rights, AT&T would've said no to stocking Lumia and then Nokia would've sold exactly 15 Lumias without AT&T.

The point is not stocking, the point is AT&T is giving Nokia a better price for having the device exclusively then what Nokia would make otherwise on hte same amount of devices.

They can barely keep it in stock. I don't think having it on all carriers would have helped.

@Tyrok: Not just that, but it was better to short stock Lumia's and have high demand than have an overstock nightmare.

Also, how many people bought the 920 because it was dirt cheap due to the AT&T subsidies that would never have happened if it weren't exclusive?

No more because they barely had supply for ATT, and their global markets are selling out quick because of the low supply.

They may have sold more, but I'd wager that there are more L920's in the hands of consumers than the 8X.

It's only 6 months exclusivity, so it's over around March/April.  Plus the TDSCDMA launch in China will factor into the next quarter's earnings, so things will improve even more.

Now if only Microsoft would pull their finger out and get WP8 up to snuff Nokia might see a better uptake of their devices.

Seriously!  There has been almost no unequivocal "forward" progress since NoDo.  Some things get better with each new release, while others get worse.
 
We need to see real progrss in the OS...and fast.

I don't think they mean the updates themselves, but rather Windows Phone as a whole.  First, you had WP7, but it didn't come with CDMA, so there goes the largest US carrier.  Then NoDo comes out to fix that, but the largest carrier only chooses one mid to low range device. Then you have Mango.  By far the best update for Windows Phone, but that was shortlived because WP8 was announced with the non-upgradablility. Tango was pretty much dead from the start, although it did allow for cheaper devices. Now Apollo is here and it is great.  However, there is still a massive app shortage, lack of new Xbox games, Windows Phone exclusives are going to other platforms, Xbox music is not very functional, etc.  And many of these have plagued Microsoft from the start! It just seems like Microsoft keeps taking one step forward and...well I'll just say another step back (not two, because we truthfully aren't regressing). 
In other words, get your crap together, Microsoft.

Disagree with you, they improved the platform on essentially every front and did the difficult but necessary step of replacing its core, which is no small feat.  Now that Windows Phone has a common core with Windows ... I think we will see more resources pour into features and less on compatibility (which was a big concern in this recent release).

How about some device sales number? Those were rather interesting, but missing from the article.

Lumia sales in the US were abysmal and they sold way more Asha phones than Lumia phones.

Also, they sold the HQ and received money from MS, where do those numbers come in?

And where are your claims coming from? WP8 models have sold well and that's why the overall earnings of their devices division (and average price of smartphone) went up. The low cost Asha models cannot carry Nokia's earnings on their own and if you really believe that, you are delusional.

Mrburns, if you actually read the report you will note that Nokia expects royalty payments to Microsoft to be net neutral with their platform support payments from Microsoft. Effectively they are getting wp for free

Lumia sales in the US went up from 300,000 to 700,000 units.  The biggest help was the larger margin on the 920.  Engadget has a breakdown of the numbers.

The sale of the HQ and microsoft money would not fall under operations. It would be shown separately on the financials. The device business was slightly profitable, but I haven't seen anyone mention a breakdown between the differenct device lines.

That's because for the Lumia line its not rainbows and unicorns. They sold 700,000 Lumia phones in the us in 3 months and a total of 4.4. Apple sold 48 million iPhones. This was horrible for windows phone and nokia

While I agree that the sales haven't exactly set the world on fire, I'd argue that they weren't supposed to and comparing Lumia sales to those of the iPhone is hardly a fair comparison. Nothing really beats the iPhone in terms of overall sales and I suspect it'll remain that way for some time to come. They've moved more Lumias this quarter and that's all that matters.

This is true but as it stands its apple,google,Microsoft/nokia,Rim.
So whatever wp8 or Nokia sells has to be put against the 3 other competitors. No one expected iPhone numbers but 700,000 units sold in the US is terrible. Everywhere I go in NYC I see a wp8 or Lumia ad.
this is Microsoft's fault. Once again they were late to the tech party. Everything around wp8 is wrong because of Microsoft. Wp8 shouldn't be called windows. People associate windows with Microsoft and that's a bad thing. The launch was terrible, they handicapped their hardware and never completed wp8 . How do you compete with when your incompetent? That's the problem here.

I agree about the name. They SHOULD CHANGE THE NAME "WINDOWS". Where are the windows in the OS? There are tiles now. Microsoft please name it "Photon" that sounds like "phone" and "photo" at the same time

Exactly what is so horrible? They made money! Thats all that matters at the end of the day. Look at HTC for example. They sell a lot more total smartphone devices than Nokia at the moment. Are they making money? NO...
You are also thinking short-term. Simply looking on a qtr by qtr basis is no way to run a business. Reporting profitability today gives Nokia exactly what the needed. A good foundation to build upon for the future.

It would be reaching to say they are doing well. But these results do a couple things that could turn the tide. First, it is a reassurance for the employees at Nokia, who have been fearing for their jobs for a while now. After working at a failing company, I've decided I do my best work when I don't have to worry about my job. Second, the cash they've generated gives them options. More phones, better tech, investing in capital equipment, etc.

This is the moment to strike, Apple beat iPhone estimates but guided lower on margin and sales next quarter. Stock is down 9% in pre-market trading. I tweeted @nokiaus on Nokia's good results and to keep the momentum growing.

Apple generated $54 Billion in revenue. I think it would be better for Nokia to not go head to head with a company that generates that much revenue unless Nokia themselves have something to show. Maybe in 24 months time.

I disagree. Apple missed the boat on a lot of things. Dismissed larger screens. Refused to bring out a phone to capture the low to mid market. Missed the growth in emerging markets. They lost the market that they themselves created. Now they face formidable competitors: Samsung, Lenovo, Blackberry, Nokia is turning around, I mean Nokia is bigger than RIM, but everyone dismisses them. Nokia have put all their eggs in one basket. They must compete just to survive another day. Apple is big, has a large cash horde and is complacent. Phone tech changes so fast another 4-6 generations of phones will be released in 24 months. The time to increase momentum is now. I hope they do it too. I like the wp8 ecosystem.

You must be new to the WP world. Wanting things to happen quickly in this ecosystem is going to drive you crazy if you don't cool it.  These big companies, Microsoft and Nokia, are moving at a good pace, but there isn't going to be anything drastic coming up besides a better camera on a phone or a minor Windows Phone update. I've been here since WinMo6.5 and I can tell you that if you keep getting your hopes up, you're going to keep getting disappointed.  It is good to have hope in the success in the companies, but don't expect too much.

Judge, you are right, I am new. They are moving at a good pace, I want the ecosystem to grow so I don't have to go back to Android and Google. Plus I have some small investments in Nokia. I do expect progress but I am fine if it happens over the year. 6.5 eh? Whay drew you to the system so early?

Nokia now has reached a number of WP devices where they have to pay more royalties to Microsoft than they get from them.

The profit from HQ was probably in some tens of millions. Most of the profits came from NSN.

Buy the rumor, sell the news. Plus Nokia is dropping in sympathy with Apple. That will change once fundamentals assert themselves again. I own some myself, I feel they are on the cusp of great things.

Happy with Nokia earnings, a good way to kick off from the previous losses. And with greater innovations and better hardware rolling out in 2013, it can only get better for Nokia.
Im just wondering why some people will be comparing Apple earnings with Nokia's which is not balanced cos d latter is just recovery from a deep slump. All the apple-fan boys and sad trolls comparing should cut some slacks for Nokia cos they will only disappoint you with their better positive earnings for 2013.
And as for RIM, its going to be a healthy competition for WP8 cos the two OSes are futuristic compared to Android and IOS who will be forced to re-invent their platforms again.
The future is really bright for WP8, Nokia and RIM combined. People will gradually switch and with time get even with the over saturated IOS and Android.
Microsoft is known to be slow and steady and they'll def come out on top, plus they have the cash to invest wherever dims fit (Dell). Ease u guys!

This is great news but what we need is more quality apps for the platform.  I don't understand why they don't use some of that marketing dollars and team up with 3rd party developers to build those apps that are on iOS and Android.  Just take the hit, pay to get them made and split the revenues.

I'd say Nokia did damn good for the short time they sold the new devices about 2 months worth of sales is pretty damn good I'd say.

I believe the reports are only positive due to property and division sells and the microsoft's money.  I wonder what will the next quarter look like if the reports will only include the phones profit, in fact I wonder how the current report would have looked like if they did not sell their HQ for nearly 1B.
Nokia should really do a great job and release smartphones that most people would like, not just us, fans. And Microsoft should really think of pushing the WP forward. They should really talk to devs and beg them to write apps and enrich the ecosystem. It will welcome everyone then after all.

A) They didn't sell their HQ for "Nearly billion". You are mistaking them for Sony.
B) That's why they usually report things in non-IFRS. That way you can compare quarters against each other without pondering what the once off payments or bills did, like the HQ sale and rental.

I'm seeing Nokia with a healthy comeback, but there's no resting in many years to come. Nokia will have to keep up the awesome Lumia and Pureview innovations. I really do hope so, as we need more devices that don't try to be like Apple (Sorry, Android, but you've borrowed too much from iOS, and BB is starting to look like iOS in certain regards too)

if nokia went in android race they wouldnt be in this situation.dont get me wrong,im not for android in any way but this is true.before ios and android,nokia had best selling,samsung,sony and rest was almost dead companys.android saved them.if nokia went android,with their capabilities,project butter wouldnt be now but at begining of android.they cant do much on wp and if ms dont give chance to them to work on wp it cant be good for anyone.nokia is going up,but we all know that it can be much much better if only ms dont press brake pedal on them

If the goal is for Windows Phone to get above 3% market share 4.4 million world wide and 700K in the US is not going to hack it.  Apple sold 48 million iPhones (and ATT reported that 8.6 million of their 10.6 million phones sold in the quarter were iPhones) and Android activated over 100 million devices (phones and tablets) then there is no growth in market share and the app gap will continue.

without apps wp wont sell good & if its not selling good there will not be great app.its devil circle