Nokia reports €487 million loss

A mountain to climb

There was a sense of ghoulish anticipation about Nokia's latest quarterly earnings announcement, given its well-documented struggles in the smartphone market and its sales warning at the end of May, and Nokia didn't disappoint.

The grim truth is that Nokia made an operating loss of €487 million in Q2, having made a profit of €439 million in the previous quarter. The previous warning was that sales from the devices division would be below the previous guidance of €6.1-€6.6 billion. The eventual figure was €5.467 billion - a big drop from both the previous, and year-ago quarters.

Shipments of Nokia smartphones plunged to 16.7 million, which means it has officially relinquished its status as the number one smartphone company to Apple.

"The challenges we are facing during our strategic transformation manifested in a greater than expected way in Q2 2011," said CEO Stephen Elop. "However, even within the quarter, I believe our actions to mitigate the impact of these challenges have started to have a positive impact on the underlying health of our business. Most importantly, we are making better-than-expected progress toward our strategic goals.

"In Q2, our immediate action to manage unexpected sales and inventory patterns enabled us to create healthier sales channel dynamics, which led to greater business stability in the latter weeks of the quarter.

"It was also validated during Q2 that Nokia understands how to take advantage of our strong intellectual property portfolio. We are well positioned to defend against intellectual property claims and to ensure that other industry participants are properly licensed.

"Thus, while our Q2 results were clearly disappointing, we are executing well on the initiatives that are most important to our longer term competitiveness.  Some progress is already evident, and thus we are targeting to end this year with more net cash and liquid assets than at the end of Q2 2011.  We firmly believe that our deliberate and unwavering commitment to making the changes necessary at Nokia is the right way to deal with the disruptive forces in our industry and drive value creation for our shareholders."