Nokia Q3 report: misery, misery and more misery

The mood at Nokia’s Finnish headquarters must be pretty bleak today. The once-dominant mobile giant has announced its third quarter financial results and to say that things are looking bad would be an understatement on par with calling Hiroshima quite a big explosion.

The company reported a US$754-million net loss on US$9.49-billion in net sales.

The situation is particularly dire in its smartphone division. Despite its best efforts with the Lumia range of devices (which we love) smartphone sales are down 63% year on year. The company only managed to shift 6.3-million smartphones this quarter, versus 16.8-million units in the same period last year. While Nokia is pegging the decrease in Lumia sales down to the fact that the versions running Windows 8 have yet to hit stores, there’s no escaping the fact that it’s likely to recover from its slip down the smartphone manufacturer charts any time soon.

According to Nokia:

The year-on-year decline in our smart devices volumes in the third quarter 2012 continued to be driven by the strong momentum of competing smartphone platforms relative to our smart devices portfolio.

Even in the ‘ordinary’ mobile phone sector, where it is traditionally strong, things aren’t looking good. While sales are up from the previous quarter, they’re still down 15% year on year. A part of that is because Samsung is denting its feature phone business, but also because of the increasing number of affordable smartphones from the likes of Huawei and ZTE.

Nokia CEO Stephen Elop admitted that things had been difficult for the company, but praised the performance of the company’s Asha range of smartphones. The phones, which are aimed specifically at emerging markets, shipped 6.5-million units during the quarter:

As we expected, Q3 was a difficult quarter in our devices & services business; however, we are pleased that we shifted Nokia Group to operating profitability on a non-IFRS basis.

In Q3, we continued to manage through a tough transitional quarter for our smart devices business as we shared the exciting innovation ahead with our new line of Lumia products.

In our mobile phones business, the positive consumer response to our new Asha full touch smartphones translated into strong sales. And in Q3, our mobile phones business delivered a solid quarter with sequential sales growth and improved contribution margin.

The one aspect of the business on the up is location and commerce, which grew on the back of high-profile deals with the likes of Amazon.

Things aren’t going to get any easier either. Looking ahead, the company says that it expects the next financial quarter to be “challenging”, “with a lower-than-normal benefit from seasonality in volumes, primarily due to product transitions and our ramp up plan for our new devices”.

Translation: it’s not going to be a happy Christmas at Nokia HQ this year.