Regrouped Nokia results reveal cost of fighting smartphone battle

Plugging the leak

Nokia re-released some historical quarterly and annual earnings summaries in order to reflect the new organisational structure it implemented on 1 April 2011. The key delineation in these new figures is a separation of the smartphone business (smart devices) from feature-phones (mobile phones).

We've reproduced all the regrouped results below and they all tell more or less the same story about the two subdivisions. The gross profit from smartphones is slightly higher than from feature-phones, despite there being a slightly higher cost of sales. But operating expenses for the smartphone business are more than twice those of the feature-phone business.

This is presumably in part due to the greater hardware complexity of the devices, but a lot of that is probably software development, which Nokia famously spends more on than Apple. As a result of this much larger operating expenses budget, the 'contribution' of the feature-phone division to the overall profitability of the company is much higher.

It's easy to imagine Stephen Elop looking at these figures when he was mulling over what to do with his new challenge and concluding something has to be done about those smartphone operating expenses. The answer he came up with was: WP7.

FIRST QUARTER 2010, REPORTED, EUR million
(unaudited)

	Smart Devices 1-3/2010	Mobile Phones 1-3/2010	Devices & Services Other 1-3/2010	Devices & Services 1-3/2010	NAVTEQ 1-3/2010	Nokia Siemens Networks 1-3/2010	Corporate Common 1-3/2010	Eliminations 1-3/2010	Nokia Group 1-3/2010

Net sales	3 362	3 194	107	6 663	189	2 718	-	-48	9 522
Cost of sales	-2 211	-2 234	-62	-4 507	-29	-1 936	-	28	-6 444
Gross profit 1)	1 151	960	45	2 156	160	782	-	-20	3 078
% of net sales	34.2	30.1	42.1	32.4	84.7	28.8			32.3

Operating expenses	-829	-340	-194	-1 363	-237	-1 015	-12	-	-2 627

Other income and expenses	28	-	10	38	-	7	-8	-	37

Contribution	350	620	-139
% of net sales	10.4	19.4	-129.9

Operating profit 1)				831	-77	-226	-20	-20	488
% of net sales				12.5	-40.7	-8.3			5.1
1) Elimination of profits recognized in NAVTEQ that are deferred in Devices & Services related to Ovi Maps service sold in combination with Nokia's GPS enabled smartphones.

SECOND QUARTER 2010, REPORTED, EUR million
(unaudited)

	Smart Devices 4-6/2010	Mobile Phones 4-6/2010	Devices & Services Other 4-6/2010	Devices & Services 4-6/2010	NAVTEQ 4-6/2010	Nokia Siemens Networks 4-6/2010	Corporate Common 4-6/2010	Eliminations 4-6/2010	Nokia Group 4-6/2010

Net sales	3 503	3 190	106	6 799	252	3 039	-	-87	10 003
Cost of sales	-2 374	-2 304	-69	-4 747	-47	-2 170	-	32	-6 932
Gross profit 1)	1 129	886	37	2 052	205	869	-	-55	3 071
% of net sales	32.2	27.8	34.9	30.2	81.3	28.6			30.7

Operating expenses	-848	-374	-206	-1 428	-283	-1 034	-29	-	-2 774

Other income and expenses	2	1	16	19	-3	-14	-4	-	-2

Contribution	283	513	-153
% of net sales	8.1	16.1	-144.3

Operating profit 1)				643	-81	-179	-33	-55	295
% of net sales				9.5	-32.1	-5.9			2.9
1) Elimination of profits recognized in NAVTEQ that are deferred in Devices & Services related to Ovi Maps service sold in combination with Nokia's GPS enabled smartphones.

THIRD QUARTER 2010, REPORTED, EUR million
(unaudited)

	Smart Devices 7-9/2010	Mobile Phones 7-9/2010	Devices & Services Other 7-9/2010	Devices & Services 7-9/2010	NAVTEQ 7-9/2010	Nokia Siemens Networks 7-9/2010	Corporate Common 7-9/2010	Eliminations 7-9/2010	Nokia Group 7-9/2010

Net sales	3 612	3 364	197	7 173	252	2 943	-	-98	10 270
Cost of sales	-2 509	-2 506	-77	-5 092	-39	-2 241	1	42	-7 329
Gross profit 1)	1 103	858	120	2 081	213	702	1	-56	2 941
% of net sales	30.5	25.5	60.9	29.0	84.5	23.9			28.6

Operating expenses	-773	-382	-184	-1 339	-263	-966	-19	-	-2 587

Other income and expenses	5	3	57	65	2	-18	-	-	49

Contribution	335	479	-7
% of net sales	9.3	14.2	-3.6

Operating profit 1)				807	-48	-282	-18	-56	403
% of net sales				11.3	-19.0	-9.6			3.9
1) Elimination of profits recognized in NAVTEQ that are deferred in Devices & Services related to Ovi Maps service sold in combination with Nokia's GPS enabled smartphones.

FOURTH QUARTER 2010, REPORTED, EUR million
(unaudited)

	Smart Devices 10-12/2010	Mobile Phones 10-12/2010	Devices & Services Other 10-12/2010	Devices & Services 10-12/2010	NAVTEQ 10-12/2010	Nokia Siemens Networks 10-12/2010	Corporate Common 10-12/2010	Eliminations 10-12/2010	Nokia Group 10-12/2010

Net sales	4 396	3 947	156	8 499	309	3 961	-	-118	12 651
Cost of sales	-3 111	-2 822	-86	-6 019	-38	-2 919	-	52	-8 924
Gross profit 1)	1 285	1 125	70	2 480	271	1 042	-	-66	3 727
% of net sales	29.2	28.5	44.9	29.2	87.7	26.3			29.5

Operating expenses	-882	-410	-218	-1 510	-288	-1 022	-47	-	-2 867

Other income and expenses	145	1	-98	48	-2	-19	4	-7	24

Contribution	548	716	-246
% of net sales	12.5	18.1	-157.7

Operating profit 1)				1 018	-19	1	-43	-73	884
% of net sales				12.0	-6.1	0.0			7.0
1) Elimination of profits recognized in NAVTEQ that are deferred in Devices & Services related to Ovi Maps service sold in combination with Nokia's GPS enabled smartphones.

FULL YEAR 2010, REPORTED, EUR million
(unaudited)

	Smart Devices 1-12/2010	Mobile Phones 1-12/2010	Devices & Services Other 1-12/2010	Devices & Services 1-12/2010	NAVTEQ 1-12/2010	Nokia Siemens Networks 1-12/2010	Corporate Common 1-12/2010	Eliminations 1-12/2010	Nokia Group 1-12/2010

Net sales	14 873	13 695	566	29 134	1 002	12 661	-	-351	42 446
Cost of sales	-10 205	-9 866	-294	-20 365	-153	-9 266	1	154	-29 629
Gross profit 1)	4 668	3 829	272	8 769	849	3 395	1	-197	12 817
% of net sales	31.4	28.0	48.1	30.1	84.7	26.8			30.2

Operating expenses	-3 332	-1 506	-802	-5 640	-1 071	-4 037	-107	-	-10 855

Other income and expenses	180	5	-15	170	-3	-44	-8	-7	108

Contribution	1 516	2 328	-545
% of net sales	10.2	17.0	-96.3

Operating profit 1)				3 299	-225	-686	-114	-204	2 070
% of net sales				11.3	-22.5	-5.4			4.9
1) Elimination of profits recognized in NAVTEQ that are deferred in Devices & Services related to Ovi Maps service sold in combination with Nokia's GPS enabled smartphones.

FIRST QUARTER 2011, REPORTED, EUR million
(unaudited)

	Smart Devices 1-3/2011	Mobile Phones 1-3/2011	Devices & Services Other 1-3/2011	Devices & Services 1-3/2011	NAVTEQ 1-3/2011	Nokia Siemens Networks 1-3/2011	Corporate Common 1-3/2011	Eliminations 1-3/2011	Nokia Group 1-3/2011

Net sales	3 528	3 407	152	7 087	232	3 171	-	-91	10 399
Cost of sales	-2 475	-2 457	-92	-5 024	-37	-2 324	-	60	-7 325
Gross profit 1)	1 053	950	60	2 063	195	847	-	-31	3 074
% of net sales	29.8	27.9	39.5	29.1	84.1	26.7			29.6

Operating expenses	-835	-386	-167	-1 388	-258	-990	-22	-	-2 658

Other income and expenses	-	-2	17	15	1	1	6	-	23

Contribution	218	562	-90
% of net sales	6.2	16.5	-59.2

Operating profit 1)				690	-62	-142	-16	-31	439
% of net sales				9.7	-26.7	-4.5			4.2
1) Elimination of profits recognized in NAVTEQ that are deferred in Devices & Services related to Ovi Maps service sold in combination with Nokia's GPS enabled smartphones.