A sharp fall in sales of Nokia's basic phones overshadowed a stronger performance from its Lumia smartphones in the first quarter, sending its shares tumbling. The results renewed pressure on Chief Executive Stephen Elop, who was hired in 2010 to turn the Finnish mobile phone maker around after falling behind rivals Samsung and Apple in the smartphone race.
He made the controversial decision to switch to Microsoft's untried Windows Phone software in early 2011 and had said the transition would take two years, a period that's now over. Analysts said he was running out of time. "Basically, he has only the second quarter," said Mikko Ervasti at Finnish investment banking and wealth management group Evli.
Nokia said it sold 5.6 million units of Lumia handsets in the first quarter, up from 4.4 million in the previous quarter and in line with expectations. But shipments of mobile phones slumped 21 percent to 55.8 units, a far steeper decline than the 8 percent fall that markets expected, with unit sales down in every region. As a result, overall net sales fell 20 percent to 5.9 billion euros from a year earlier, far short of the 6.5 billion euros forecast by analysts in a Reuters poll.
Sales at its equipment venture NSN fell 5 percent to 2.8 billion euros, weaker than expected, although its underlying profit was higher than expected due to restructuring. Nokia's future is seen as depending on higher-margin smartphones as a growing number of global consumers want access to apps such as Twitter from their handsets, but it also needs to protect its position in the basic phone market so buyers of its lower-end handsets don't defect to other brands when they eventually upgrade to smartphones.
In markets such as China, Nokia faces strong competition not only from rivals such as Samsung but also from emerging, cut-price competitors. Nokia recently launched a 15 euro phone in an effort to boost its share in emerging markets, and has been expanding its mid-tier offering, too, with its range of Asha feature phones to keep customers loyal.
Though Nokia said it expected Lumia sales to grow more strongly in the coming quarter, Samsung and Apple, which between them will have shipped nearly 100 million smartphones in the first quarter, show little sign of ceding market share. Samsung's Galaxy S4 is set to go on sale later this month and is expected to outsell its predecessors with monthly sales of around 10 million.