, ,

Surprising strong sales for Nokia’s Lumia series lift shares, makes positive outlook

lumia920_2330131bPromising sales figures for its Lumia smartphone series helped Nokia achieve underlying profits during the fourth quarter, creating a positive outlook for a company beset by troubles for the past few quarters.

Finland-based Nokia has been losing ground to Apple Inc and Samsung Electronics in the lucrative smartphone market. It said the surprising result was due to a stronger performance of the company’s Nokia Siemens Networks division, about $65.2 million in royalties from patents, and cost cutting measures.

The announcement lifted some pressures off the company’s CEO Stephen Elop and raised Nokia’s shares to nine-month highs. Elop has been on the hot seat ever since he tried switching to Microsoft’s Windows operating system.

He said that the transition would take two years, creating an expectation from investors, whose patience are clearly running out. Nokia’s Lumia series was seen as the savior for the company, and investors are keen to indicate that Elop needs to find good alternatives or a better strategy  to turn the company’s direction early in 2013, or else quit.

Elop said he was pleased how well the Lumia series had been selling so far. He also mentioned that sales of the latest high-end Lumia 920 models has met some supply issues, creating shortages.

The Finnish company disclosed that its fourth quarter operating margin was between break even to 2 percent.  It announced previously that the margin was around 6 percent.

The full details including cash position and information about profit will be shared this coming January 24 in an official report.

The company’s net sales in services and devices amounted to $5.09 billion during the fourth quarter. Nokia sold about 86.3 million devices, with smartphones taking the slice of about 6.6 million units. Lumia series handsets sold was about 4.4 million units.

Shares of Nokia increased 10.8 percent translating to 3.32 euros. Investors cheered on the rare rise following the company’s announcement.

Positive it may be, but the company is still in dire straights, and it estimates that the its margin would be around negative 2 percent during the first quarter of this year.

“We continue to operate in a competitive environment with limited visibility,” said Elop.

The sales figure for Lumia series during the fourth quarter is relatively small knowing that the total smartphone sales during the period amounted to 200 million, some analysts noted.

“4.4 million Lumias sold is not yet a promise of a turnaround,” analyst Mikael Rautanen of Rautanen said. He said he downgraded the shares of Nokia to “sell” last Tuesday.

Pierre Ferragu, an analysts in Bernstein, said he is not optimistic about the shares and rated them “underperform”.

“Last year, in order to sustain Lumia volumes, Nokia had to cut prices very rapidly, driving gross margins close to zero. We believe this will repeat this year,” Bernstein noted.

Another analyst, Greger Johansson of Redeye, said the announcement is not a clear indicator of a turnaround.

Johansson said: “They will have to prove a lot more until you can say that. I’m not still convinced that they are going to manage to succeed with those new smartphones. They have to sell a lot more in volumes until you can say that.”

source: reuters