Nokia Q3 results: a disaster with no hope in sight. And admission Lumia 920/820 Windows Phone 8 won’t help in Q4

Nokia announced their results for the July – September quarter. And they are disaster.

So much for the hope of positive surprise. It seems my expectations for Nokia weren’t low enough after all.

The only bright thing thing in a quarterly report – was Nokia’s Mobile Phones division, which managed to eke a small 3% growth compared to Q2. And did it profitably. What’s more impressive – they’ve sold 6.5 million of newly launched full touch Asha phones. A whole bunch of them – in Europe. And kept mobile phone average selling prices more or less at the same 31 Euro level for a year now. As holiday shopping season approaches, we can expect further growth here.

Nokia seems to be holding its own against onslaught of cheap Androids in low end, for now. Will it last? It’s an open question. Nokia had a very similar round of good news in Mobile Phones unit in the second half of last year. Then, in early 2012, quality Android phones got down to then current Asha price levels, and all the gains were wiped away. Will it happen next year, when quality Droids go another step down the pricing level? Or is Stephen Elop on to something, when he says that power and data frugal design that’s in full touch Asha’s DNA, will help it keep its own against resource guzzling Android amongst very cost conscious consumers? I don’t know, maybe. We’ll just have to wait and see.

These were the good news. In smartphones, though, it’s bad, bad, bad and getting worse. With no hope in sight.

Bad #1. Symbian sales have now entered terminal decline. Seems I was right to call Symbian dead, for real this time, back in April. But I still didn’t expect for it to expire this fast. Symbian sales have now been dropping by 40% or more every three months, for the third quarter in a row. In Q3 Nokia shipped 3.4 million Symbian devices. At this rate of decline they will ship less than 2 million in Q4.

Bad #2. Windows Phone sales aren’t helping much. Given the reduced marketing budgets and Microsoft’s announcement in June that current Lumias won’t be upgradable to WP8, it is not a big surprise that Nokia Windows Phone volumes stopped growing and declined this quarter. Especially when company itself decided to add to the misery with that mad September 5th Lumia 920 announcement, when real shipping products were months away.

Stephen Elop calls the September 5th announcement “A deliberate action to become part of conversation before holiday season starts”. I hope “being in a conversation” was worth all the lost sales. I hope there was a person here and there, who decided not to buy iPhone 5 or Galaxy S3 and wait, just because he heard about Lumia 920. But I still call it a bunch of malarkey.

And a drop of 27% in 3 months? In a growing market? With Nokia engaging in some serious price dumping along the way? And with low end Lumia 610 available around the world? Even with Microsoft Osborning Windows Phone 7.5, one could have reasonably expected Nokia to keep the sales levels it got to a quarter before.

But maybe Nokia simply gave up on first generation of Lumias last spring, as depressing Q1 and then big AT&T Lumia 900 launch numbers came in? And just decided to somehow coast along until Windows Phone 8 comes out?

That would explain reduced marketing budgets for Q3. It would also explain why Nokia announced Lumia 920 when it did. How else do you create a plausible excuse for a drop in sales you expect anyway? That “deliberate action” part in Elop’s explanation of Sept 5th does actually sound true. Just not the rest of it.

Bad #3. Lumia prices. Let’s talk a bit about that price dumping Nokia was doing this quarter. Lumia average selling price went down from 186 Euros in Q2 to 160 Euros in Q3. Part of that, most likely, was increasing prevalence of cheapo Lumia 610 in Nokia Windows Phone mix. But even bigger part were price cuts to NWP portfolio across the board. Nokia’s sales forecast team royally screwed up. They have millions of Lumias sitting in Nokia and partner warehouses, and the only way to move them is to sell them at a loss.

In a little over 10 months since launch, Nokia Lumia ASP went down from 220 to 160 Euro. A 60 Euro, 27% drop. With newest flagship – Lumia 900 – launched only 5 months ago. Things got so bad in Q3, Nokia itself admits that the margins on Lumia handsets are now worse than margins on Symbian devices in Q3, 2011.

Stop for a minute and think about that. Nokia now earns less (or loses more) on every Lumia device sold, than they did with dead-end Symbian a year ago. While in the midst of serious price dumping then, too.

Wasn’t the whole point of Windows Phone strategy change to move away from soon to be money losing Symbian, to a more lucrative next generation smartphones? And now Nokia is telling us that they can not earn more from Lumia than they did from Symbian 6 months after it was end-of-lifed?. If that’s not a damning evidence of strategy failure, I don’t know what is.

Oh, right. Windows Phone 7.5 wasn’t ready for prime time. It is hard to break through iPhone and Android dominance. There might have been some bumps along the road but Nokia is executing on a new strategy. Sales may have come in low, but what else could you expect? Nokia grew smartphones volumes that quarter. Nokia burned through less cash this quarter. Nokia doubled Lumia sales in Q2. Nokia is non-IFRS profitable in Q3… These all are valid sounding excuses.

But I am tired of hearing excuses quarter after quarter after quarter. I want to see some positive trend, not a new set of talking points used to put a PR lipstick of positive spin on a turd of actual results.

And now let’s get to the best one of those talking points. “Just wait for Windows Phone 8, Lumia 920, and you’ll see. Everything before was a part of the big plan. You just way and see how things will magically turn around real soon”.

They wouldn’t.

Things are  is getting worse as Nokia admits low sales expectations for new Lumias in Q4.  If you’ve been expecting a big boost from Lumia 920/820 and the next generation Windows Phone launch – you are in for a big disappointment.

Nokia already admitted in Q4 outlook that it “…expects the fourth quarter 2012 to be a challenging quarter in Smart Devices, with a lower-than-normal benefit from seasonality in volumes, primarily due to product transitions and our ramp up plan for our new devices…

That “lower-than-normal benefit from seasonality in volumes“ most likely means that Nokia does not expect any growth in smartphone volumes in Q4. Which translates into 6.3 million smartphones sold during October-December. With the way Symbian is dropping already – only 2 million of them will be on the old OS. The rest – 4.3 million – will be Lumia Windows Phones. Probably half of them will be older cheaper Lumias Nokia still has to sell. Which leaves 2.2 million for Lumia 920 and 820.

So, Nokia claims they have the best most innovative smartphone out there in Lumia 920. And then there’s cheaper 820. In this day and age, when Samsung ships 10 million of Galaxy S3s in the first two months, Apple sells 5 million iPhones in a launch weekend, try putting any positive spin on that 2.2 million Lumias number. For Nokia. For a flagship. On a platform it’s been selling for a year already. I can’t.

Oh yes, that other excuse. “… our ramp up plan for our new devices… ” Can you tell me what that means?

Nokia already has distribution/sales organization in place. It is shifting 70+ million devices a quarter, after all. So sales org doesn’t need much ramping-up. Maybe manufacturing? But Nokia has already been making Windows Phones for more than a year. Most of high-end NWPs are made in Nokia’s own factories. And they made millions of Lumias there already. So manufacturing does not need much ramping too. Component shortages? Well, there were supply issues with S4 Snapdragons from Qualcomm. But those ended months ago, haven’t heard anything about component shortages lately.

The only problem Nokia does have, for about a year now, is low demand for Lumia smartphones. Which would explain why Nokia needs to have at least 7 week “ramp-up” period” for its most important product of the year. It has burned its carrier, wholesale and retail partners enough, starting with N97 ending with Lumia 800. And lost enough clout in the meantime, so now partners are telling Nokia to take a hike.

And Stephen Elop knows it. He already started preparing ground for Lumia 920/820 WP8 sales disappointment in January. Yesterday, when pressed about carrier and retail interest in Lumia 920/820, the only thing Nokia CEO was able to say was that “carriers and partners are responding favorably to innovations in Lumia 920”. Never once did he mention carrier demand during the conference call.

The “ramp –up”. “We are launching only in select markets on select carriers in Q4” statement. Why is Nokia limiting itself so much when it bleeds money and needs to go big? It’s simple –they can not go big.  There is no demand from carriers and other resellers who matter. So Nokia goes to a few of them with “the biggest marketing budget ever”, and hopes for the best. Maybe it will work this time. With a halo of overall Windows 8 launch.

As if it was the lack of marketing money that doomed Lumia 800. As if the biggest marketing budget and exclusive AT&T partnership made Lumia 900 such a success. And now the guy behind AT&T Lumia 900 stratagem is in charge of Nokia global sales.

Windows Phone 8 will be a great success. The big breakthrough for Nokia. Just wait until they ramp up the sales… sometime in 2013

Yeah. Right.

I’ll be very happy to find out how wrong I was when Q4 numbers come in, early next year.  But I just don’t see anything good happening to Nokia anytime soon.

And they are running out of time.

Author: Stasys Bielinis

While I like to play with the latest gadgets, I am even more interested in broad technology trends. With mobile now taking over the world - following the latest technology news, looking for insights, sharing and discussing them with passionate audience - it's hard to imagine a better place for me to be. You can find me on Twitter as @UVStaska'

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  • http://pulse.yahoo.com/_MIIBHZNKM26RVFUAFZNHRJGE2E Mega

    Your wrong, and simply a hater like most of the authors of these misguided articles.
    Nokia is here to stay, no amount of cheap androids and iphones can change that.
    Talk about the patents that NOKIA gets paid for on every android and Iphone sold.
    Talk about the leadership Nokia shows in its hardware design and technology.
    Talk about NOKIA’s industry leading Mapping platform and associated services.
    Every quarter for the last 2+ years, you authors talk about losses, and NOKIA is still here. You talk about Symbian declining and NOKIA is still here.
    The new Lumia will be offered on more providers, offer exclusive features, and have map services 25 years in the making.
    Nokia isn’t a beginner and will make a come back.
    I would ask the author to eat his words, but eating looks pretty easy for him.
    Enjoy!

  • TGMzero

    The truth and nothing but the truth.

    For all the hoopla from WP enthusiasts, Nokia is bleeding badly. And even their starting to realize that betting the farm on WP was likely a mistake. And be damned for saying this but….

    No one wants WP.

    It’s the simple truth. The vast majority of consumers want nothing to do with Micorsoft and its mobile phones. And all the hardware advancements won’t change that anytime soon.

    Honestly, Nokia should’ve went with a two part startegy. Android and WP. That would have at least turned a small profit on the Android end.

    Would Android be the huge savoir for Nokia? Not really. But it would have been a big improvement over what’s happening to them now.

  • sunny

    Some food for thought for the author. Read this.
    Europe in love with Lumia 920 !! The paid/unpaid Pre-orders exceed all other phones’s pre-orders including iPhone 5.
    http://nokiapoweruser.com/2012/10/18/europe-in-love-with-lumia-920-the-paidunpaid-pre-orders-exceed-all-other-phoness-pre-orders-including-iphone-5/

  • En

    What another piece of bias shit from a fanboy author. You don’t deserve this job.

  • 69

    Considering there was only 1 new (and the last Symbian phone) made recently it should be no surprise that its sales died this fast. Of course, announcing its death in a few years probably did not help either.

  • blaah

    We saw identical reports from Europe when Lumia 800 was available for pre-order. Remember how that ended?

  • Giga

    Talk about Elop already encouraging Microsoft to make their own smartphone – and to cannibalize Nokia sales numbers even further. Especially if MS comes up with an “innovative” phone that saves WP and matches up nicely with the Surface tablet.

    The Verge: Elop: a Surface phone would stimulate the Windows Phone ecosystem

  • sunny

    Show me one such report showing that Lumia 800 pre-order exceeded iPhone’s pre-order anywhere.

  • Uyen Do

    Wow… 95% people in the world using windows including me want nothing to do with Microsoft… I thought that I know myself until I found you. Thank u. hahahaha

  • Uyen Do

    You can call yourself a genius… discovering the truth hahahaha

  • Uyen Do

    Android does not have a foundation of desktop, laptop, school, business, government, etc. to exist. Eventually it will become obsolete.

  • vhtgf

    Nope, your talking about Nokia and windows phone sales. They’ll probably be dead and obsolete by Q4 next year if the surface phone arises, a direct jab at Nokia.

  • VasyaPupkinsan

    Mega, you are a retarded shill

  • VasyaPupkinsan

    People don’t care about your stupid fugly no kia junk. Grow a brain.

  • VasyaPupkinsan

    Also… 95% of people in the world are stupid retarded monkeys… what a coincidence.

  • peebeebee

    What a great comeback…

    I’m not sure if you are in IT (I am), but most ITers I know agree Microsoft is doing great with their new product lines. They are innovative, daring and new. Salesfigures are not all that… Apple was an underdog for a long time and still had beautiful products.

    I love Android too, but WP8 phones are beauties in their own right. And Nokia is a great partner for them. And a lot of Europeans agree (I’m one of them). You can’t call that much people stupid, because that would make you seem the stupid one.

  • Sumadhur

    Steven Elop is very successfull in utilizing entire Nokia resources to boost Microsoft WP ecosystem. He is using every penny of Nokia to increase market share of WP phones by killing Symbian/Meego and selling Lumia at heavy loss, at throw-away price. Still, WP shares are not crossing 4%.

    Elop is a Microsoft virus which Microsoft pushed to make Nokia:

    1. Kill WP competitors like Symbian and Meego

    2. Avoid Nokia going with Android, a big threat to WP

    3. Make Nokia go exclusively with WP even if it is a toy OS with just 2% market share with those ugly / unattractive wall tiles

    What’s the fun in killing its cash cow (Symbian) and going exclusively with MS when MS market share is under 3% and when MS can license to other OEM ? How can dirty Elop explain this ?

    What’s the problem in continuing Symbian/Meego and adding WP and Android phones, like how other OEMs do ?

    When WP is success, how does it gaurantee that Nokia will be success, when Samsung/HTC/ZTE etc will also produce high-quality WP phones ?

    Elop has no answer to these questions. Somehow, he has been authorized to loot Nokia like anything.

    In that, stupid Elop has failed in his mission of boosting WP ecosystem at Nokia’s cost. Thank God! Now, Microsoft will see its hell in very near future for playing so dirty business tricks as it has been doing with many companies such as Netscape, Novell, Nokia, etc.