Nokia posted a large operating loss of €487m today, only its second quarterly loss in 19 years. And without the royalty settlement with Apple it would have been much worse: the settlement gifted Nokia a one-time bonus of €430m.
"Our new strategy introduced ambiguity," admitted CEO Stephen Elop. The figures tell a story of unit sales and margins both crashing dramatically.
Smartphone units fell 34 per cent year-on-year, from 25.2 million to 16.7 million; non-smartphone unit shipments fell from 85.8 million a year ago to 71.8 million in Q2 2011, down 16 per cent. Overall, phone sales were down 20 per cent from Q2 2010.
It means Nokia lost its smartphone lead, as predicted, falling to third position behind Apple and Samsung. Net sales fell by 11 per cent QoQ and were 7 per cent down from a year ago.
Nokia reported a negative margin of 4.5 per cent (+6.7 per cent on a non-IFRS basis), confirming it was paying people to take its phones away.
Elop also confirmed the exploration of a private equity deal for Nokia Siemens Networks. The division looked relatively perky, compared to the bloodbath at the rest of the company. NSN posted a lower loss than a year ago, with net sales up 20 per cent to €3.642.
Nokia accounted for the negative margins by explaining that the company had to shift inventory for its unwanted phones that had built up in Europe and China. Yet even with the "giveaways", unit shipments fell 23 per cent in Europe, 30 per cent in Asia-Pacific, and 34 per cent in China.
The company also recognised significant changes taking place in the quarter as Elop takes an axe to the bureaucracy. Nokia says it is aiming for break-even margins by the end of Q3.
Elop confirmed that the orphan N9 Linux phone will be "regional" only, and that volume shipments of Windows-based devices won't materialise until next year. ®