Disappointing phone sales up pressure on Nokia chief

Nokia chief executive Stephen Elop faces growing pressure as sales of smartphones and traditional handsets disappointed markets. Picture: AP
Nokia chief executive Stephen Elop faces growing pressure as sales of smartphones and traditional handsets disappointed markets. Picture: AP
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DISAPPOINTING sales figures for Nokia’s latest phone handsets yesterday upped the pressure on chief executive Stephen Elop.

Shares in the Finnish technology giant fell as much as 6 per cent at one point after the company said it shipped 7.4 million Lumia phones in the second quarter, up almost a third on the first quarter but fewer than the 8.1 million units forecast by analysts.

Investors have pinned their hopes on Nokia’s Lumia smartphone range – which Elop decided to base on Microsoft’s 
Windows Phone software in 2011 – to revive its ailing fortunes and close the widening gap on frontrunners Samsung and Apple.

But yesterday’s figures confirmed that progress on the smartphones has been slower than analysts expected.

Sales of regular mobile phones, which still account for more than half of its device revenues, were also weaker than expected.

Shipments of such handsets fell 4 per cent from the previous quarter to 53.7 million units, while the market’s average forecast had been 56.2 million.

Analysts have said weak regular mobile phone sales for Nokia in the past two quarters showed customers are moving up to smartphones more quickly than expected but switching to rival brands.

The pace of the decline has raised fears the company may run low on cash before smartphone sales pick up.

Nokia has been cutting costs and selling off assets to buy time for a turnaround. Its net cash reserves fell to €4.1 billion (£3.53bn) from €4.5bn in the previous quarter, in line with expectations.

“The work with Lumia is still challenging, although there has been some progress,” said Mikko Ervasti, an analyst at Evli.

“But they have to pick up the pace, as in mobile phones they have large volumes they may lose.”

Nokia has launched several handsets this year, including a €15 phone and new Lumia models.

But the new handsets, while impressing many critics, have failed to halt a shift to phones running Android software developed by Google.

Phones using Android and Apple’s iOS software account for well over 90 per cent of the global smartphone market, while Windows Phone handsets account for around 3 per cent, a report said in May.

One bright spot in the quarterly report was the improved profitability at Nokia Siemens Networks (NSN), a formerly troubled joint venture with Siemens. Nokia agreed earlier this month to buy Siemens’s stake. Nokia’s update came after two other technology giants, IBM and Intel, reported weak results.

Intel’s second-quarter profit of $2bn (£1.32bn), was down 29 per cent on last year. IBM saw earnings fall 17 per cent to $3.23bn although the latest quarterly figures were ahead of expectations and forecasts for the remainder of the year have been increased.

IBM’s chief financial officer Mark Loughridge said: “In the first half, we’ve had strength in Latin America and the Middle East and Africa region, but declines in some of our larger markets like China and Australia have impacted the overall performance”.

But he added : “As we look at the second half,” he said, “we have some very, very distinct tailwinds.”