Nokia warned investors this morning that its first quarter performance was lower than expected, ahead of its earnings report next Thursday. The company also doesn’t expect things to shape up for the second quarter, which means this will be a difficult year for the company overall.
But on the bright side, Nokia revealed it sold 2 million Lumia devices in the quarter at an average price of 220 euros. The company says it has seen sequential growth in Lumia activations since the devices launched in November, making it clear the new smartphone line is off to a strong start.
Nokia said that the operating margin for its Devices and Services division was negative 3 percent for the quarter, when it previously expected to break even. For the second quarter, the company expects performance to be “similar or below” what it saw this quarter.
Not surprisingly, Nokia cited “competitive sales dynamics” that hurt its feature phone and smartphone business. The company said that competition was especially tough in India, the Middle East, and China
“Our disappointing Devices & Services first quarter 2012 financial results and outlook for the second quarter 2012 illustrates that our Devices & Services business continues to be in the midst of transition,” Stephen Elop, president and CEO of Nokia, said in a statement today. “Within our Smart Devices business unit, we have established early momentum with Lumia, and we are increasing our investments in Lumia to achieve market success. Our operator and distributor partners are providing solid support for Windows Phone as a third ecosystem, as evidenced most recently by the launch of the Lumia 900 by AT&T in the United States.”
The company estimates that net sales in its Devices and Services division were 4.2 billion euros for the quarter. Feature phone sales were estimated at 2.3 billion euros (or 71 million units sold), while smartphone sales were 1.7 billion euros (or 12 million units sold). Nokia expects its Devices and Services gross margin to be around 25 percent. The company says it will have around 4.9 billion euros in net cash and other liquid assets by the end of the quarter.
On a call with investors this morning, Elop said the rate of low-end Android devices entering the market, along with their dirt cheap prices, were a big problem for Nokia. He also said competitors had “particular products at particular price points” where Nokia isn’t even a competitor, like high-end touchscreen feature phones.