John Paczkowski

Recent Posts by John Paczkowski

Nokia’s Bad News Not Completely Horrible — Shares Soar

Posting second-quarter earnings this morning, Nokia reported a loss of $1.74 billion and smartphone sales that fell 39 percent to 10.2 million. Gruesome financials, to be sure. But, remarkably, Nokia’s stock has rallied on them.

Shares of Nokia rose as much 15 percent following the company’s earnings report, and closed up 12 percent at 1.54 euros. They haven’t seen a spike like that in more than four years. Why the sudden return of investor interest?

Four reasons:

  1. Nokia is working aggressively to cut costs, and cash conservation appears good.
  2. Sales revenue from Nokia cell phones and services rose 45 percent in North America, to €128 million. That’s the first such increase in longer than anyone would care to remember.
  3. Nokia sold four million Lumias during the quarter, and that’s about a million more than some analysts had expected.
  4. Discussing the company’s performance during today’s earnings call, CEO Stephen Elop hinted that Nokia may be the first handset maker to release a device running Microsoft’s forthcoming Windows Phone 8 mobile operating system. “Note that on the number of occasions when Windows Phone 8 has been demonstrated, it has been on a Nokia device,” Elop replied while dodging a question on this topic. “We have a close relationship that is unlike what anyone else has with Microsoft.”

So, while the quarter was certainly a difficult one for Nokia, it did have a few bright spots on which investors can pin hopes of a continued turnaround.

“Nokia has been in free fall in recent quarters, and while it is not out of the woods yet, it does seem as if it is pretty close to the bottom,” Canalys analyst Pete Cunningham told AllThingsD. “It is interesting that such a set of results has generally been received so positively. In my mind, it can be explained by the fear that it could have been much worse. It looks as if Nokia has slowed its decline, although it does have another tough quarter (Q3) ahead of it, with the performance of its [smartphones] the main concern.”


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