Nokia reports Q4 net profit as Lumia smartphone sales slowly improve

IDG News Service - Nokia swung to a net profit during the fourth quarter, as it sold a growing number of Windows Phone-based smartphones. The company reported fourth-quarter sales of 8.04 billion euros ($10.71 billion), down 20% year-on-year, making a net profit of 202 million euros, compared to a net loss of 1.07 euros billion a year earlier.

The company sold a total of 86.3 million mobile phones during the fourth quarter, of which 6.6 million were smartphones (including 4.4 million Lumia devices). That compares to 113.5 million phones, including 19.6 million smartphones, during the same period in the previous year.

The number of Lumia smartphones Nokia sold compares to the 2.9 million it sold during the third quarter and 4 million during the second quarter. Nokia shared few details on its Windows Phone sales during the fourth quarter in 2011, only saying that it has "sold well over 1 million Lumia devices to date."

The financial results and Lumia sales is a step in the right direction for Nokia, and the next 12 months will be key for both it and Microsoft's future in the smartphone space, said Pete Cunningham, principal analyst at market research company Canalys.

IDC's Francisco Jeronimo agreed: In "2013 Nokia has only two options: either significantly grow sales or change its strategy, radically," he said via email.

The backing Windows Phone is getting from operators is one positive sign, according to Nokia CEO Stephen Elop.

"Now more than ever, operators are pushing for a third ecosystem to emerge, and they are committing to more marketing, training and in-store displays to help Windows Phone and Lumia sales grow," Elop said.

The sale of 9.3 million Asha phones with full touchscreens was another positive note. To compete with low-cost Android-based devices, Nokia is focusing on keeping the total cost of ownership low, using proxy browsing technology and how the Facebook client has been implemented, according to Elop. Going forward, the company will work to bring down the cost of its Lumia products, as well as continue to develop the Asha product line, he said.

Nokia's sales improved in only one part of the world, North America. The company sold just 700,000 phones, but that is still a 40% increase year-on-year. Revenue increased by 270% to 196 million euros.

Nokia also sees an opportunity to sell more Windows Phone version 8-based smartphones to enterprises.

"I think that's something you are going to hear us talk quite a bit more about in the months and years ahead," Elop said.

Besides selling more Windows Phone-based smartphones than expected, Nokia also strengthened its net cash position by approximately 800 million euros sequentially, of which approximately 650 million euros was generated by Nokia Siemens Networks, the company said.