Nokia Corp. (NOK), the beleaguered mobile handset developer, reported mixed financial results for the first quarter of 2013. The company improved its adjusted operating margin attributed to better sales of the flagship Lumia series of smartphones. Nokia currently has a Zacks Rank #3 (Hold).
Quarterly net loss was approximately $359 million or 9 cents per share compared to a net loss of $1.2 billion or a loss of 33 cents per share in the prior-year quarter. However, quarterly adjusted (excluding special items) loss per share of 3 cents was better than the Zacks Consensus Estimate of a loss of 6 cents per share. Quarterly net revenue was approximately $7,729 million, down 20% year over year and also below the Zacks Consensus Estimate of $8,833 million.
Adjusted operating profit in the reported quarter was $239 million compared with an operating loss of $341 million in the prior-year quarter. Quarterly adjusted operating margin was 3.1% compared with a negative 3.5% in the year-ago quarter. During the first quarter, the company generated $272 million of cash from operation, compared with cash consumption of $779 million in the year-ago quarter. At the end of the first quarter of 2013, Nokia had approximately $5,917 million of cash and cash equivalents compared with $5,755 million at the end of 2012.
Devices & Services Segment
Quarterly total revenue was approximately $3,775 million, down 32% year over year. Within this segment, Smartdevices (including smartphones and tablets) revenue was $1,537 million, down 32% year over year. Mobile Phone revenue was $2,100 million, down 31% year over year. Other revenue was $103 million, down 21% year over year.
Smartdevices average selling price (ASP) was $252, up 34% year over year. Mobile Phone ASP was $62, down 8% year over year. In the first quarter of 2013, Nokia shipped 6.1 million Smartdevices (including 5.6 million Lumia-series phones and 0.5 million Symbian smartphones) and 55.8 million Mobile Phones (including 5 million Asha full touch phones), down 49% and 21% year over year, respectively.
Nokia Siemens Network Segment
Quarterly net revenue was approximately $3,703 million, down 5% year over year. Quarterly adjusted operating profit was approximately $259 million compared with an operating loss of $103 million in the year-ago quarter. However, adjusted operating margin was 0.1% compared with a negative 34.1% in the prior-year quarter.
Quarterly net revenue was approximately $285 million, down 22% year over year. Quarterly adjusted operating loss was $6.6 million compared with an operating profit of $47.5 million in the year-ago quarter. Adjusted operating margin was a negative 2.3% compared with 12.9% in the year-ago quarter.
For the second quarter of 2013, Nokia expects its Devices & Services segment adjusted operating margin to be approximately negative 2%, plus or minus 4%. However, unit sales of the Lumia-series of smartphones will be sequentially higher. HERE segment will incur operating losses in the second quarter.
Adjusted operating margin for the Nokia Siemens Networks will be 5% plus or minus 4%. Nokia further expects to reduce the operating expense in this segment by more than €1 billion by 2013 from the 2010 level of €5.35 billion.
Ever since Apple Inc.’s (AAPL) iPhone hit the market, Nokia and Research In Motion Ltd. (BBRY) have started facing distressing times. The situation further aggravated once Google Inc. (GOOG) launched its Android software and several handset manufacturers adopted that operating system.
However, the just concluded first-quarter 2013 ushered in some rays of hope as Nokia’s Lumia-series of high-end smartphones got initial market traction. We believe that the new device coupled with effective cost management strategy may revive the company’s fortune going forward.