The world’s largest mobile phone maker put an end today to weeks of speculation today about sales of its Lumia smartphones, and what those sales would mean to its financial results. Nokia Corporation (NYSE: NOK) lost $1.4 billion during the fourth quarter, and the struggling Finnish company says it has sold “more than a million” of the Windows-based Lumia smartphones to date. That number pales in comparison to the 37 million iPhones that Apple sold in its fourth quarter, but Lumia has only been on the market for a few months. “iPhone sold just 2 million units during its first year, and you saw the same sort of thing for Android phones,” says analyst John Feland of Argus Insights.” Feland likes Nokia’s strategy of positioning its Lumia 710 (the lowest-end model) with T-Mobile, which markets the phone as a lower cost alternative for the estimated 60% of Americans who have not yet upgraded from feature phones to smartphones. Nokia has dominated the feature phone market for years, so a transition to a Nokia smartphone could be a natural progression for many consumers.
But those attractive sales prices of course put pressure on Nokia’s opetating margins. “They are under some pressure on the profitability side of their handsets. Average selling price has been drifting down the past couple quarters,” says Wayne Lam, senior analyst at IHS iSuppli. Nokia says it average sales price for a smartphone slipped from $202 in the fourth quarter of last year to $184 in the most recent quarter. Overall, the company’s operating margin slid 56%.
But Lam says it would be unwise to count Nokia out when it comes to smartphones. “To their credit they have executed to plan,” he says. “I thinks most analysts were pessimistic that they could do anything (with Windows) by the end of the year. You think about how it performed in Europe — they sold about a million units over a six week period. This is the best performance … for a Windows 7 device. I’m not saying it’s something to cheear about but its meeting expectations.”
Owning the Windows phone market may not seem like much of a prize compared to the market for iOS (Apple) or Android phones, but that could change as smartphones and tablets continue to find their way into corporate environments, where the Windows operating system is already well established.
Want your news faster? Follow me on Twitter.
