Embattled cellphone maker Nokia is widely expected to report a loss later today, for the third consecutive quarter, as it battles to entice end-users with its handsets.
Nokia, once the most popular handset manufacturer in the world, has seen its market share eroded as it battles to get end-users to buy its devices, which have good capabilities and features, but not the wow factor.
According to Gartner, Nokia is currently in third position in the smartphone stakes, with 7.6% of the market. Samsung has 29.7% of the market, while Apple has 18.8%. Nokia went from 9.1% in the first quarter to 7.6% in the second - the latest available tracker.
The Barron's blog cites analysts as expecting low Lumia shipments and a loss that is even bigger than the second quarter decline. Nokia is also expected to report a mammoth EUR750 million cash burn.
Bleak outlook
Barron's quotes Sanford Bernstein's Pierre Ferragu as saying Nokia is only expected to ship between two million and three million Lumia handsets and he anticipates a wider loss. In the second quarter, four million handsets were shipped.
In the second quarter of the year, Nokia posted a EUR826 million operating loss, wider than the EUR487 million loss it reported in the first three months of the year.
Year-on-year, the company saw net sales slump 19%, as net sales of mobile phones dropped 11%, and smartphone sales fell 34%. Smart devices' contribution dropped to a EUR507 million loss, from EUR216 million a year before.
Ferragu says low shipments are a "potentially frightening number" and Nokia is expected to report another weak gross margin. "We expect low feature phone shipments and recognise an upside risk on that front as Nokia ramped up new models in emerging markets. This would be temporary, though, as we don't believe these models are competitive against Android's low end."
Cowen & Co's Matthew Hoffman is quoted as saying Nokia will report an earnings per share loss, in line with consensus. He says there is little evidence that Nokia's current strategy will solve its devices and services unit's structural deficiencies in the long-term.
CEO Stephen Elop said last quarter that Nokia was "taking action to manage through this transition period". Nokia sees the Windows 8 phone as an "important catalyst" for its Lumia smartphone, he adds.
"During the quarter, we demonstrated stability in our feature phone business, and enhanced our competitiveness with the introduction of our first full touch Asha devices."
Software slip-up
World Wide Worx MD Arthur Goldstuck says Nokia is between a "rock and a Windows place". He explains the manufacturer was lambasted for selling the previous operating system version and has now been hammered for selling Windows 8 on phones before it launches for PC.
Goldstuck says the timing of Nokia's revival has been "unfortunate" as its announcement of its marriage with Microsoft - about 18 months ago - was a year-and-a-half before the software maker was ready, leading to 18 months of bleeding.
Nokia's poor sales figures cannot be rescued by its brand name, says Goldstuck. He says the devices must be compelling and its flagship - Lumia 920 - while full of features, is just not compelling.
Earlier this month, Reuters reported that Nokia knocked 10% to15% off the prices of two of its top of the range smartphones, hoping to boost sales before newer models arrive in markets next month.
Nokia cut the price of the Lumia 800 by around 15% and the Lumia 900 by 10% in Europe, according to device pricing data compiled by British research firm CCS Insight.
Despite the cuts, the manufacturer is just not getting phones into people's hands, says Goldstuck. He adds that the company still has the potential to be the "it" name, but needs to do more to wow consumers.
Losing ground
Vesact analyst Sasha Naryskine says "Nokia is in a pickle" as the company is under margin pressure, because it discounted the Lumia range. While the handset is not shoddy, in tough times, all the haters come out, he says.
Naryskine says, while Nokia stock gained some ground in New York last night, the share is nowhere near where it was in 2009. Stock in Nokia gained 4.26% to close at $2.94 before losing ground in after-hours trade.
This is a far cry from the $15 a share the company was trading at three years ago, and much less than around $40 towards the end of 2007, says Naryskine. He says the number of Lumia handsets Nokia sells will be vital because the company could face a "massive" problem if the devices do not sell well.
"Maybe they should go back to basics and chop down trees."
Nokia will publish its third quarter 2012 results today at about 1pm.
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