The headlines tells us just how precarious the situation was –- and, in reality, still is -- for Nokia before CEO Stephen Elop got on the honker with a bunch of analysts yesterday and told them their projections for the fourth quarter would turn out to be all wrong when results are formally announced in a couple of weeks.
In short, it appears that its adoption of Microsoft’s iOS is paying off, literally, although cost-cutting and asset-shedding also play a large part in the seemingly surprising turnaround. And don’t start counting those chickens yet, some analysts say.
“In what was seen as a make-or-break quarter, Mr. Elop said Nokia would break even or turn a 2% profit rather than report a loss as large as 10%, as analysts expected,” Kevin J. O’Brien reports in the New York Times.
American depositary shares rose 18.7% to $4.45 on the New York Stock Exchange after the discussion and accompanying press release were digested. That’s a lot better situation than two years ago when, O’Brien relates, Elop “spoke of flaming ocean platforms and shark-infested waters to describe the problems he inherited as the company teetered on the brink of irrelevance.”
“Overall, [Nokia] forecasts it will sell 86.3 million devices in the quarter,” Scott Martin reports in USA Today. “Of those, Nokia said it expects to report total smartphone sales of 15.9 million, of which 4.4 million will come from Lumia units running Microsoft's Windows Phone operating system.”
The Wall Street Journal’s Sven Grundberg writes that Nokia’s figures are “the first evidence that people are buying its newest smartphones, quelling investor concern that the Finnish giant’s bet on Microsoft Corp.'s software was a strategic blunder.” But Grundberg goes on to list the challenges it faces, starting with its cash on hand -– down to €3.6 billion from €7 billion when Elop took command in 2010.
Nokia recently sold its headquarters in suburban Helsinki and is also selling patents, divesting some business units and cutting jobs and other “expenses.” It’s also “improving the performance of its wireless network joint venture with Siemens AG, Nokia Siemens Networks,” Grundberg writes.
What’s good for Nokia is also good for Microsoft as Nigam Arora points out in Forbes, since Lumia phones are based on its Windows mobile operating system. “This is the first hard data-based sign that Microsoft’s efforts against Google Android are beginning to work,” he writes.
Analysts generally laced their optimism with a heavy dose of caution, as you might expect.
"Nokia has reached the trough and is looking into an L-shaped or U-shaped recovery," Strategy Analytics analyst Neil Mawston tells the Wall Street Journal.
“This clearly shows Nokia is making good progress with consumers,” Jyske Bank A/S analyst Robert Jakobsen says in a piece by Bloomberg’s Adam Ewing.
But Bernstein analyst Pierre Ferragu still rates the shares as “underperform,” according to Reuters’ Ritsuko Ando. "Last year, in order to sustain Lumia volumes, Nokia had to cut prices very rapidly, driving gross margins close to zero,” Ferragu says. “We believe this will repeat this year."
And eWeek’s Don Reisinger expounds upon 10 reasons why “Nokia is in deep trouble. And even though the company had a strong fourth quarter, its chances of future success seem slim.”
Nokia also launched “much awaited” Lumia 920 and 820 devices in Delhi yesterday, reportsThe Economic Times’ Gulveen Aulakh. It “used the event to compare key features of these devices vis-a-vis competition, signaling an aggressive stance as it attempts to stay relevant in the high-end smartphone space.” It also said its “comparisons with competition were done ‘with respect,’” Aulakh reports.
Given the relative strengths of Samsung and Apple -- and there have been recent reports that Apple is considering an entry-level iPhone that could sucker punch Nokia’s cheaper offerings –- that respect is well merited.
“It’s a good start to the year for Nokia,” Restivo tells the Globe and Mail’s Iain Marlow “but they’re not yet a phoenix rising from the ashes.”