Nokia Q2 results reveal $1 billion operating loss, 4 million Lumia handsets sold, and a lack of US penetration

Microsoft introduced its Windows Phone 8 operating system in late June and Nokia appears to be confident it hasn't impacted its Lumia Windows Phone sales. Speaking on a Nokia investor call today, CEO Stephen Elop revealed "Lumia activations were flat to up in the weeks following Windows Phone 8 announcement." Nokia posted a $1 billion operating loss for Q2 2012, selling four million Lumia devices in the quarter.

The Finnish phone maker now plans to focus on Lumia updates. Elop mentioned all of Nokia's existing Lumia devices will receive a Windows Phone 7.8 update and that the company is committed to releasing exclusive apps for its devices. Nokia is also planning to release "competitive" smartphones with Windows Phone at higher and lower price points and Elop says Nokia will continue to sell existing Lumia devices "beyond the launch" of Windows Phone 8. "We anticipate that Microsoft will launch a bold and aggressive marketing campaign for Windows 8," says Elop — one that he expects will help boost Lumia and Windows Phone.

Nokia's Rolling Thunder strategy for reconquering the US smartphone market continues to struggle after only six months. In its bleak earnings report today, Nokia revealed it shipped just 600,000 handsets in North America during its latest Q2 2012, down from 1.5 million in the same period last year. The 60 percent drop year-on-year, coupled with an identical ship rate in Q1 2012, shows that the company's risky bet on Windows Phone is still a slow starter.

Nokia's 600,000 figure encapsulates phones in general, rather than the specific smartphone segment, but it does show that analyst estimations of 330,000 Lumia sales in the US over a period of around four months may be accurate. The firm revealed four million Lumia sales in Q2 2012, double the previous quarter — but with the lack of phone sales growth and break down of individual device sales it's hard to say whether the Lumia 900 has had much impact in boosting Windows Phone's market share in the US. One thing that is clear from today's results is that, try as it might, the majority of Lumia sales are still outside the US — an important market that Nokia needs to succeed in.

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.

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:

Nokia's previous quarter saw the company describe the UK market as a "more challenging" one than the US — where Lumia sales exceeded expectations. Nokia has just announced its Q2 2012 financial results today, and the company has revealed four million Lumia devices were sold in its recent quarter — beating analyst predictions by 200,000. After selling over one million Lumia devices during its final quarter of 2011, and two million in Q1 2012, the latest figure shows that Nokia's Rolling Thunder approach is working at a slow and steady pace with over 7 million units shipped to date.

Nokia now faces the challenge of ensuring there's enough consumer interest in its Lumia range to see it through Q3 until Windows Phone 8 arrives later this year. The company recently introduced a pink variant of its Lumia 900 in the US and also dropped the price to $49.99 on AT&T, but a controversial decision by Microsoft to drop support for existing devices with Windows Phone 8 could hurt future sales. Nokia has promised to update its range of Lumia devices with Windows Phone 7.8, an update that brings the new Start Screen, to appease its current customers. The company's next quarter will be the most telling, shedding light on whether it can double Lumia sales once more while competing with new Android devices and the general expectation of Apple's next iPhone.