Nokia earnings show some hope, but Windows Phone Lumias lag in the U.S., get killed in China

Nokia's latest earnings report holds some good news, notably that the company was profitable for the quarter. But its flagship Window Phone Lumia devices are still struggling in the U.S. and performing dismally in China.

The company had a net profit of $270 million in the fourth quarter, a dramatic improvement over its $1 billion loss the year previous. But there's a big caveat about that profit -- it was driven by big cuts in expenses and staff. Nokia also said it won't pay dividends in 2012. The Associated Press noted that:

The Finnish company said Thursday that revenue dropped to €8 billion ($10.6 billion) from €10 billion as smartphone sales plunged 55 percent, and it gave a grim outlook, saying it would not pay a dividend for 2012 to save money.

Nokia's Lumia brand of Windows Phone handsets sold 4.4 million units for the quarter, a somewhat respectable showing, given how poorly sales were in the past. But in the key North American and China markets, the sales numbers range from poor to dismal.

In North America (which is primarily the U.S.), 700,000 Lumia devices sold, up from 500,000 a year ago. That simply isn't good enough. The 700,0000 devices is tiny fraction of the market. And things may get even tougher, because in addition to competition from the iPhone, Android, HTC's Windows Phone 8X, the Blackberry 10 operating system is about to release. CNet notes:

At least for the early part of the year, the carriers appear to be preparing their resources behind Research in Motion's BlackBerry 10 operating system, which debuts next week.

In China, things are even worse. The Financial Times reports that Nokia made a deal with with China Telecom for the carrier to sell a customized version of Nokia's Windows Phone Lumia, so you would expect that to help sales boom. That didn't happen. The Times says that Nokia sold only 4.6 million phones in China for the fourth quarter, compared to 14.7 million in the fourth quarter a year previously. This massive drop in sales occured even though the Chinese market is going like gangbusters, and will be the world's largest for smartphones in 2012.

The poor sales of Lumia devices in the U.S. and China isn't only bad news for Nokia, but for Microsoft as well. If sales of Lumia Windows Phone devices continues to lag in the countries with largest and second-largest markets for smartphones, it's hard to know how Windows Phone can eventually succeed.

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