Nokia has just posted its Q2 2012 financial report, revealing a total operating loss of €826 million (around $1 billion). The loss was offset by large licensing royalties and a regular quarterly cheque from Microsoft, resulting in a net cash rise of €102 million (around $125 million). The Finnish company previously warned investors that its Q2 results were likely to be "similar to or below" its enormous €1.3 billion (around $1.6 billion) operating loss in the first quarter, but performance this quarter is slightly above analysts' expectations.

Windows Phone sales double

Lumia sales reached four million — double last quarter's two million, and in keeping with Nokia's "Rolling Thunder" plan for Windows Phone. Rolling Thunder was Nokia's plan for taking back marketshare in the US, but quarter-over-quarter growth was flat. Nokia shipped a total of just 600,000 units in North America in Q2, meaning Its Lumia 900 launch had little impact on overall sales.

The bulk of it's financial troubles, however, stem from the fact that Nokia phone sales in other sectors are falling far faster than Windows Phone sales are growing. The company sold 83.7 million phones in total, up from 82.7 last quarter, but still down 4.8 million from last year's figures. Sales of "Smart Devices," which encompasses Symbian, MeeGo, and Windows Phones, dropped from 16.7 million in Q1 to 10.2 million in Q2. The average selling price (ASP) of its Smart Devices rose from €143 ($176) last quarter to €151 ($185), thanks largely to a "shift towards sales of Lumia devices which carry a higher ASP than Symbian devices." However, the ASP of the Lumia series fell from €220 ($270) last quarter down to €186 ($228), and is likely to fall further as the company pushes more low-end Windows Phones and slashes the price of its high-end models.

Third quarter will be a challenge

Nokia expects its performance in the third quarter to be similar to its Q1 and Q2 results. It predicts that "the third quarter 2012 to be a challenging quarter in Smart Devices due to product transitions." The company is continuing its transition away from Symbian and MeeGo to Windows Phone, and will also have to endure the wait for Windows Phone 8. The lack of a long-term upgrade path for its Lumia devices may hurt the company significantly in sales, although Nokia says the Windows Phone 8 announcement hasn't impacted sales yet. CEO Stephen Elop remains bullish on the company's long term prospects. In a prepared statement he says:

"While Q2 was a difficult quarter, Nokia employees are demonstrating their determination to strengthen our competitiveness, improve our operating model and carefully manage our financial resources. We are executing with urgency on our restructuring program. We are disposing of non-core assets like Vertu. We are taking the necessary steps to restructure the operations of the company."

Nokia now holds liquid assets valued at just under €4.2 billion ($5.15 billion), down from €4.87 billion ($5.98 billion) last year. As its cash reserves dwindle, the company may look to its patents for financial sustenance. Speaking on patents, Stephen Elop told The Wall Street Journal that Nokia "may decide there could be elements of it that could be sold off, turned into more immediate cash for us—which is something that is important when you're going through a turnaround."