Nokia reports Q3 figures ahead of its Microsoft sale

Nokia today released its Q3 financials, showing a mixed bag of news. Net sales were down 22 per cent year-on-year at €5.7bn, but flat from the previous quarter. Operating profit was up 139 per cent year-on-year, but down 29 per cent from Q2.

The company sold 64.6m mobile devices in Q3, down 22 per cent from the same period a year ago, but up 6 per cent from Q2. Its smartphone range faired better than its basic phone range, with sales number up 40 per cent year-on-year to 8.8m units, compared to a fall of 27 per cent for its basic feature phones to 55.8m. As you can see from the volumes though, smart phones account for just 14 per cent of its total device output (the figure was 8 per cent a year ago), so although Nokia is shifting towards more reliance on smart devices, it’s not doing it fast enough, and phones are still losing it money.

The average selling price for its smart devices dropped to €143 per unit, down 9 per cent on Q2 and a similar amount from a year ago. The average selling price of its basic phones was €27, down 13 per cent from a year ago. Which brings us to the profitability of Nokia’s devices – and the numbers are not good. In Q3 2012 Nokia was in a real mess and was losing a fortune. Last quarter, things were looking better, and its device business reported a loss of €33m. This quarter, it worsened to €86m.

Nokia Solutions Networks (the old NSN business brought back in-house after the Siemens adventure ended) is doing a little better. Q3 sales were down 26 per cent year-on-year at €2.6bn, and down 7 per cent from Q2, but operating profit (IFRS) was down just 9 per cent on the year at €166m, actually up 8 per cent from the previous quarter.

Despite a renewed focus on its Here location services business (which won’t be following the phone division to Microsoft), sales were disappointing. Q3 net sales were down 20 per cent on the year at €211m and down 9 per cent from Q2. The fledgling division returned to profitability though, up year-on-year to €14m.

Risto Siilasmaa, Nokia Chairman and interim CEO confirmed that following the planned completion of the Microsoft transaction, Nokia will have three business units: NSN, Here and Advanced Technologies.

“Our strategy work is making good progress and it has already become clear that there are meaningful opportunities for all of our business areas: NSN, HERE and Advanced Technologies,” said Siilasmaa. “In all of these businesses, we have strong assets that we continue to invest in for the long term benefit of our customers and shareholders.”

“The third quarter was among the most transformative in our company’s history,” said Timo Ihamuotila, Nokia CFO and interim President. “We became the full owner of NSN and we agreed on the sale of our handset operations to Microsoft, transactions which we believe will radically reshape the future of Nokia for the better. Subject to the completion of the Microsoft transaction, Nokia will have significantly improved earnings profile, strong financial position and a solid foundation from which to invest.”

He added; “We are pleased that NSN and Here both generated solid profitability in what was a seasonally weak third quarter and at a time when we continue to make significant R&D investments into future growth opportunities.”