Nokia Posts Losses: Restructuring Ahead

by Holly Shoemaker

As expected, Nokia announced profits that fell short of Q1 2012 expectations on Thursday, April 19, 2012. 

Numbers at a Glance 

• The company reported a loss of $1.2 billion, or 929 million euros. 
• When compared to the last 12 months, sales fell by 30 percent to 7.354 billion euros. The figure was in line with analysts' expectations.
• In China, a growing market for Nokia, sales fell 70 percent when compared to last year’s figures.

Nokia's Response

In its conference call with shareholders, Nokia acknowledged the decline in sales, and attributed the numbers to restructuring changes. In Feb. 2011, Stepen Elop, Nokia’s CEO, spearheaded the campaign to reinvent Nokia by switching to a Microsoft Windows-based system, the Lumia line of phones. 

During the call, Elop confirmed that Colin Giles, Nokia’s head of sales, will exit the company in June 2012. The company also plans to decrease its operating costs. Elop said these moves are needed so the company may compete. In particular, the company needs to worry about Samsung. Samsung will likely dethrone Nokia and become the world's largest handset manufacturer.

Concluding Thoughts

Nokia has made significant changes and no one should overlook that the company has differentiated itself from other smartphone manufacturers. With the wide range of Android Market phones available in North America, introducing a Windows 7 phone seemed like a logical way to re-enter the North American market.

Nokia shipped two million Lumia devices in Q1, and analysts have pointed out that it took time for the Android Market to take off. The same could hold true for Nokia.

Ultimately, numbers speak louder than words, and Elop will need to prove that partnering with Microsoft was the correct choice over going with an Android smartphone. In Q4 2012, we will better know if Nokia's partnership with Microsoft pays off.