Performance of the past
Even though the sales of the Lumia smartphones surged 32%, as compared to the previous quarter, the company recorded a fall of 24% in revenue. The second quarter revenue came in at $7.5 billion, not even coming close to the analysts’ estimate of $8.4 billion. The drop in revenue was primarily because of the reduced demand for basic and economical handsets.
The drop in sales of both handset segment, as well as Nokia Corporation (ADR) (NYSE:NOK) Siemens Network, or NSN, affected the top-line. The NSN segment contributed $3.6 billion to the revenue, signifying a decline of 16.8% from the previous fiscal year. Adjusted operating profit increased by a massive 1,072% to $429.5 million as compared to the preceding year. The increase in the income of this segment was an outcome of the segment’s reduced expenses.
Nokia also booked a net loss of approximately $364 million or $0.08 per share, taking the company’s net loss over the past nine quarters to over $6.5 billion. Not an impressive statistic for a company trying to re-establish itself as a global powerhouse.
What to expect from the future?
Is Nokia Corporation (ADR) (NYSE:NOK) capable of bouncing back? Let’s take a look at the company’s future plans.
Nokia is trying to reduce its losses by cutting down on the expenses. Nokia Siemens aims to cut down about $2 billion in expenses as the company is trying to restrict the loss. Meanwhile, Nokia has also struck up a deal of $2.2 billion to acquire a 50% stake of Siemens AG in NSN. The company is also planning to reduce the operational expenses in the Device and Services segment by $4 billion.
Nokia Corporation (ADR) (NYSE:NOK) is also trying to build on the success of the Lumia series smartphones. The massive increase of 32% in the sales of the Lumia series has given the company enough confidence to start the production of a new phone in the series. Nokia recently announced the Lumia 1020 and will start shipments before the end of August.
Following the trend of introducing low-priced phones, Nokia Corporation (ADR) (NYSE:NOK) has also introduced a series of economical smartphones to unlock the stern market. The company has unveiled economical Lumia phones targeting the emerging market. On the back of success of the Lumia series, Nokia expects that low-priced version of the smartphone, with new features, will help the company boost its margins.
But, in my opinion, Nokia Corporation (ADR) (NYSE:NOK)’s reluctance to switch to Android based mobile phones will prevent it from returning back to its glory days.
Cut-throat competition
The presence of the big competitors like Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) has made things even more difficult for Nokia as it tries to revive its dominance. Let’s take a look at Nokia Corporation (ADR) (NYSE:NOK)’s competitors one by one.
Apple
In these stringent economic conditions, many mobile developing companies are struggling to amplify their margins by selling flagship devices, but not Apple. Apple Inc. (NASDAQ:AAPL) recently released its quarterly earnings and the results were phenomenal as it booked an all-time high in revenue for the quarter. The revenue of for the quarter increased $300 million to $35.3 billion, indicating a growth of 1% from the previous year.
