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Lumia fails to light the way ahead for Nokia

By He Wei in Shanghai | China Daily | Updated: 2012-04-21 07:33

The new Lumia lineup has failed to become the white knight riding to the rescue of the troubled headset maker Nokia Oyj, which encountered its fourth quarterly profit slide in a row.

Among the "greater than expected challenges", as cited by Nokia CEO Stephen Elop, are the sluggish sales of smartphones in high-growth markets like China, and the changing tide of feature phones, which are increasingly challenged by inexpensive full-touch devices.

According to its first quarter interim report, the Finland-based phone manufacturer reported an operating loss of 1.34 billion euros ($1.8 billion) in the first quarter of 2012, whereas it gained a net profit of 439 million euros in the same period last year.

The report downgraded predictions on Nokia's operating margin next quarter to be similar or even below the first quarter level of -3 percent.

Lumia fails to light the way ahead for Nokia

The company had pinned great hopes on its linkup with Microsoft Corp to phase out its homegrown Symbian system and sharpen its competitive edge in the smartphone sector.

But revenue generated by smart devices was 1.7 billion euros, just half of the amount reached a year ago.

In a separate note, the company announced on Thursday that Colin Giles, a 20-year Nokia veteran who stepped in last year to revamp the company's China operations, will leave his post for personal reasons, adding to the uncertainties over the company's future in China.

China has been the largest source of the sales slump in Nokia's global layout, where revenue dropped 70 percent compared with same period in 2011. Over the last three months, the company sold just 9.2 million units of mobile devices, down 62 percent year-on-year.

In March, Nokia and China Telecom announced the Nokia 800C, its first Lumia phone for the world's largest smartphone market.

Sales figures are not available at the moment, according to Wang Jingqiu, the company's Beijing-based spokesperson, but she said "sales have been brisk in all possible channels".

The loss is also burdened by costs at its unprofitable equipment venture with Siemens AG, which spent 772 million euros on restructuring. The Nokia Siemens Network is intended to focus on mobile broadband and services.

To turn the tide, the company stated its intention to continue expanding the Lumia lineup, in terms of new models aimed at both higher and lower price points. It plans to roll out the Lumia 610, Nokia's most affordable Lumia smartphone in the coming weeks in Asia, including China.

While Nokia has made great strides in introducing smartphones by expanding its market coverage from 14 to 45 in the past three months, its share of the smartphone sector has been severely eroded by iOS and Android, which dominated the market during the "vacuum" between Nokia's current Windows phone system and its predecessor, Symbian, analysts say.

"The key for Nokia to gain in the smartphone market is how it breaks out of the vicious cycle - the low sales of Windows phones holding back application makers, and consumers shunning the phones due to the lack of the applications they are accustomed to," said Shen Sui, a telecommunications specialist at the consultancy iResearch.

While Nokia also plans to renew its feature phone portfolio with seven new products, its low-end phones failed to cover the costs of smartphone transition as rivals introduced cheaper touch-screen models in China, many of them operating on Android software, said Wang Ying, analyst from data provider Analysys International.

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