- Kuwait Times Extra
HELSINKI: Ailing mobile maker Nokia turned in another thumping loss yesterday, as it tries to arrest a decline towards irrelevance in a smartphone market dominated by Apple’s iPhone and Samsung’s Galaxy models. The company, which has been burning through money at a rate that would clean it out in a couple of years, managed, however, to cling on to more of its cash reserves in the second quarter than the market had feared, giving its battered shares an 18 percent boost.
The shares had fallen around 80 percent since February 2011 when the company announced its shift to the largely untried Microsoft Windows phone operating system.
Sales of its new Lumia phones, which run the Microsoft software, doubled from a low base in the previous quarter, but have yet to grab share back from Apple and Samsung Electronics in the most profitable part of the mobile market. Nokia reported a second-quarter net loss of 1.53 billion euros, or 8 euro cents a share when adjusted for one-off items, compared with the market’s average forecast for a loss of 9 euro cents a share. It held net cash of 4.2 billion euros ($5.2 billion), compared with the market estimate of 3.7 billion, but still down from 4.9 billion at the end of the first quarter.
The company’s shares were up 15 percent at 1.576 euros at 1157 GMT, having touched 1.621 euros. Details showed that advance royalty payments of 400 million euros accounted for most of the lower fall in its cash position.
“It’s partly the advanced royalties. Nevertheless, it was a positive move by management to calm down the market,” said Juha Varis, who holds Nokia shares as part of the Danske Invest Finnish Equity Fund. But Varis said he was worried Nokia had placed all its bets on Windows Phone, which wasn’t yet showing it could help reverse Nokia’s fortunes.
Nokia sold 4 million Windows phones in the second quarter, still only a fraction of Apple’s expected sales of 30 million iPhones or Samsung’s 50 million smartphones. “I think currently the company is too dependent on Microsoft,” Varis said. “What happens if this marriage ends? We would prefer to have a second option to Windows.” Nokia forecast its third-quarter loss in the phone business would be just as steep as the second at minus 9.1 percent, an outlook that was worse than analysts had expected.
“The third quarter is going to be the most difficult quarter for Nokia,” said J.P. Morgan analyst Sandeep Deshpande. “I don’t think there’s anything fundamentally fixed, and a guide of minus 9 percent again in D&S (Devices and Services) came as a bit of a shock to us. So I’m perplexed by the strength of the (market) reaction,” said Lee Simpson, analyst at Jefferies & Co.
In the three months to June, all three major credit ratings agencies have cut Nokia bonds to “junk”, while the company warned twice on profits and said it planned to cut one in five jobs. – Reuters
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