It’s been more than two years since Nokia CEO Stephen Elop decided that the struggling phone maker would make handsets based on Microsoft’s Windows operating system. Elop, a former Microsoft executive, said it would take two years to make the successful transition to Windows. He said at the time that Nokia had to change its business strategy or die.
26 months later, Nokia’s Lumia line of Windows phones have less than 3% of the smartphone market. Nokia has lost millions of dollars and laid off thousands of workers. The company’s first quarter sales were down 21% versus the first quarter of 2011, after adjusting for changes in currency values. Sales of devices and services were off 33%, and sales at the company’s infrastructure arm, Nokia Siemens Networks, were off 4%. Total first quarter revenue was $7.6 billion and the company lost $196 million.
“While we remain in a highly competitive environment, Nokia is executing our strategy with urgency and managing our costs very well,” said Elop. Some analysts think the current quarter could be Nokia’s last chance to find its footing. The company sold 5.6 million Lumia phones in the first quarter, up from 4.4 million in the previous quarter. But while it works to grow Lumia sales, Nokia desperately needs the cash flow from sales of feature phones to keep it afloat, and that cash flow appears to be drying up. Total mobile phone volume was just 55.8 million units in Q1, down 30% from the previous quarter, and down 21% from the year-ago quarter.
Nokia has $7.6 billion in debt on its balance sheet, and all three of the major ratings agencies have downgraded its debt to junk status. At the end of the first quarter Nokia had $13.1 billion in cash and liquid assets.
Many investors have speculated that if bankruptcy appears imminent, Microsoft will buy Nokia’s handset business. Microsoft has said that it does not want to get into the device business unless its current partners do not provide consumers with what they want. Just last week, the software giant described Nokia as “a great company.”
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