Ina Fried

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Nokia Dips Into Red as Q1 Sales Drop Nearly 29 Percent

Finland’s Nokia had warned that its quarterly sales report would be a painful one, and the numbers released on Thursday back that up.

Nokia reported that quarterly sales were 7.4 billion euros, down from 10.4 billion euros a year ago. On the earnings side, the company lost 25 euro cents per share.

The company also announced on Thursday that top sales executive Colin Giles is leaving the company. His direct reports will now funnel to Niklas Savander, executive VP of markets.

Nokia had said last week that it would fall short of its goal of near-break-even results, and cautioned that things in the current quarter would only be about the same as they were in the disappointing first quarter.

“We are navigating through a significant company transition in an industry environment that continues to evolve and shift quickly,” CEO Stephen Elop said in a statement. “Over the last year we have made progress on our new strategy, but we have faced greater than expected competitive challenges.”

In particular, things have been rough at the low end of the market, where Android is gaining quickly on the kinds of feature phones that have historically made up much of Nokia’s profits. In both smartphones and lower-end devices, Nokia saw significant drops in both the number of phones being sold and in the average prices those phones were fetching.

“We have a clear sense of urgency to move our strategy forward even faster,” Elop said. “We have focused our efforts in the low-end of smartphones and feature phone asset to drive improved business results and conserve cash. We are confident in our strategy and focused on responding urgently in the short term and creating value for our shareholders in the long term.”

For the current quarter, Nokia said to expect its operating margins to be worse than the -3 percent it posted during the first quarter. Nokia still looks to reduce its operating expenses by $1 billion over the next fiscal year, as compared to 2010.

“Nokia plans to accelerate and substantially deepen Devices & Services cost savings, consistent with its strategic focus,” it added. “Nokia will share further details as quickly as possible.”

Nokia noted that it did receive $250 million in “platform support payments” from Microsoft during the quarter. Nokia said that while it also pays minimum software royalty commitments back to Microsoft, it expects over the life of the agreement for the payments from Redmond to exceed those it must pay to Microsoft.


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