The world’s largest mobile phone maker confirmed today that sluggish smartphone sales have depressed sales and earnings. Today Finland’s Nokia (NOK) attached some numbers to last week’s announcement that its devices and services unit would lose money during the first half of 2012. Nokia lost $1.2 billion in the first quarter, as net device sales fell 40% from the year-ago quarter to $5.5 billion.
Nokia said it sold just 2 million Lumia Windows phones in the first quarter. CEO Stephen Elop, who came to the company from Microsoft, decided last year to bet the company’s future on new Windows-based phones. Wireless carriers have been hopeful that the combined marketing muscle of Nokia and Microsoft will eventually produce meaningful competition for Apple’s iDevices and Google’s Android products.
The Lumia phone went on sale in Europe before it came to the US, so analysts have been paying close attention to that market. Author Tomi T. Ahonen, who once ran Nokia’s Global 3G Business Consultancy Department, thinks European retailers may be steering customers away from Nokia’s Lumia phones due to their high return rates. “The Windows Phone based smartphones on all brands have high return rates and sales hate that,” says Ahonen.
Tony Cripps, principal analyst at Ovum, thinks European carriers who do not actively promote the Windows phones may be shooting themselves in the foot. “European carriers need to do a great deal more to assist the underdogs… if they aren’t to be the engineers of their own self-fulfilling prophecy of handing all power over their subscribers to the duopoly of Apple and Google,” says Cripps.
In its earnings release, Nokia offered little hope that the smartphone picture will improve any time soon. Although the company still dominates the feature phone market, its lack of progress in the smartphone space has cut its stock price in half during the past year. Earlier this week, Moody’s Investor’s Services downgraded Nokia’s debt to Baa3, one level above junk status.
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