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Nokia hit by weak handset sales

Reuters/ AFR | July 19, 2013
Weak quarterly sales of Nokia smartphones raised the heat on CEO Stephen Elop, whose decision to adopt Microsoft's untested Windows Phone software has yet to deliver the recovery in the company's fortunes he was hired to achieve.

Weak quarterly sales of Nokia smartphones raised the heat on CEO Stephen Elop, whose decision to adopt Microsoft's untested Windows Phone software has yet to deliver the recovery in the company's fortunes he was hired to achieve.

Nokia has pinned its hopes on its Lumia smartphones to close the yawning lead of the market frontrunners Samsung and Apple, but progress has disappointed many investors and analysts.

Nokia shares fell as much as 6 percent on Thursday after the company said it shipped 7.4 million Lumia phones in the second quarter, up 32 per cent from the first quarter but fewer than the 8.1 million units forecast in a Reuters poll of analysts.

Analysts, some of whom had said Nokia needs to hit 10 million Lumia sales within the next few quarters to convince them it could survive in smartphones, said they were worried Nokia's Windows Phone models had come too late to the race.

Phones running Google's Android and Apple's iOS operating systems accounted for well over 90 per cent of the global smartphone market in the first quarter, while Windows Phone handsets accounted for only around 3 per cent, according to market research firm IDC.

A large base of established Android and iOS users attracts a larger base of software developers to create the apps that run on the phones, which in turn enhances the phones to buyers.

Weak results from BlackBerry and HTC, and a profit warning by market leader Samsung have recently raised concerns that the market was reaching saturation.

"The concern is that the high-end smartphone market looks weak across the board, whether it be weak numbers from HTC or BlackBerry, or Samsung coming in lower than expected. That's going to make it tough for Nokia and Lumia volumes," said Canaccord Genuity analyst Michael Walkley.

Nokia has launched several new handsets this year, including lower-priced Lumia handsets. Last week, it unveiled its newest high-end model, the Lumia 1020, with a 41-megapixel camera.

"Nokia's just announced a high-end product into a very weak market," Walkley said. "It's a fantastic product on its own. But consumers are happy buying an iPhone 4 at reduced prices. It will be interesting to see whether the Lumia 1020, with its megapixels, is differentiated enough."

The weak Lumia sales number was particularly worrying since sales of regular mobile phones, which account for over half of its device sales and are a valuable source of cash while Nokia waits for Lumia sales to take off, were also below expectations.

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.

 

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