Nokia's Q2 2013 earnings are out — and it's clear that the company's road to recovery is nowhere near over. The Finnish manufacturer posted an operating loss of €115 million (roughly $151 million) from €5.695 billion ($7.46 billion) in revenue over the quarter, which is a little below expectations. Nokia expected its Devices & Services division, which has traditionally been its largest, to be in the red this quarter, but its small loss of €33 million ($43.25 million) is lower than its prediction.
All-told, the company's profitability dramatically improved year-over-year (the company lost €826 million this time last year), and is pretty steady quarter-over-quarter. Anticipated poor results from both the Devices & Services and HERE mapping divisions were offset somewhat by yet another good quarter for the company's Nokia Siemens Networks (NSN) arm — the data networking and telecommunications equipment division made €8 million ($10.5 million) over the quarter.
Despite the poor numbers, Nokia has achieved underlying profitability, and Lumia sales are up
Looking at non-IFRS numbers — a metric that excludes expenses not related to the day-to-day operations of a business, and shows whether a company is reaching underlying profitability — performance was far better. The non-IFRS profit for the quarter was up massively at €303 million ($397 million).
Shipments of Nokia's Lumia Windows Phones increased from 5.6 million last quarter to 7.4 million — the highest ever for the company. Nokia predicted that Q2 would see a sequential rise in Lumia shipments above the 27 percent seen in Q1, giving them a minimum target of around 7.2 million sales, so growth was roughly in line with expectations. Feature phones continued to drop in volume: Nokia sold 53.7 million this quarter. That's down from 55.8 million in Q1 and 73.5 million this time last year.
The company's average selling price (ASP) for each phone it ships also fell. It now stands at €45 ($59), down from €48 ($63) last quarter. Smartphone-specific ASP also dropped from €191 ($250) last quarter to €157 ($206). Given that the company launched the Lumia 520 (named the 521 in America), its cheapest Windows Phone yet, some drop in ASP was to be expected, but the size of this decrease isn't likely to go down well with investors.
In an effort to streamline its operations and "respond to industry dynamics," Nokia says it will restructure its Mobile Phones business. The company estimates it will affect up to 440 employees globally, although it will create a number of new positions as well as providing opportunities for redeployment. Nokia believes its actions will focus its product offering "with the aim of improving product competitiveness and delivering more innovation."
Next quarter is going to a big one for Nokia. The Lumia 928 (Nokia's first Verizon flagship) didn't come out until mid Q2, and the Lumia 925 (for T-Mobile) missed the quarter entirely. Q3, then, will be the first full quarter when the majority of Americans will be able to get their hands on a high-end Nokia Windows Phone. When you add the AT&T-bound Lumia 1020 into the mix — Nokia's first device in recent memory to go head-to-head with the likes of the iPhone 5 and Galaxy S4 without undercutting its rivals on price — we're really approaching make-or-break time for the company's US efforts.