Nokia investors eye Windows Phone results Microsoft partnership in focus at fourth-quarter earnings report

Nokia investors eye Windows Phone results
Microsoft partnership in focus at fourth-quarter earnings report

 Investors will be looking to see how Nokia Corp.’s first range of Windows Phones performed when it reports its fourth-quarter earnings on Thursday, as they watch for any signs of a comeback at the mobile-phone maker.

In October, Nokia NOK +0.70%   FI:NOK1V +1.24%   Chief Executive Stephen Elop unveiled two new Windows Phone devices, the Lumia 800 and the Lumia 710. The products came just eight months after the company agreed a partnership with Microsoft Corp. MSFT +0.20%   that made Windows Phone the operating system of choice in Nokia smartphones. More on the Nokia and Microsoft partnership in detail.

Smartphone volume is a closely-watched indicator of performance for phone-makers, especially for Nokia, which has been lagging behind in the lucrative smartphone market.



“The main story [in Nokia’s fourth-quarter report] is how the Microsoft portfolio has performed. That’s what everyone will zoom in on,” said Neil Mawston, a director at research firm Strategy Analytics.

However, Mawston said investors are focusing too much on the Finnish firm’s latest smartphones so soon after their release. Currently, the Lumia range is available in just a handful of countries and has only recently been launched in North America.

“It’s too soon to judge,” Mawston said. “If you look back to Apple’s AAPL -0.28%  iPhone performance in 2007 and Google’s GOOG +0.03%   Android in 2008, they had a sluggish start the first quarter after launch and people started to write them off, but new models came a year or so later and sales rocketed.”

Francisco Jeronimo, an analyst at International Data Corporation (IDC), said people have over-estimated sales of Nokia’s Windows Phones, but it has been a promising start for the Microsoft-Nokia collaboration, according to IDC’s most recent sales data.

“Nokia did quite interesting things; I estimated sales of 500,000 for Windows Phones [from all manufacturers] and the number will be significantly higher than that, with Nokia taking most of those numbers,” Jeronimo said.

“If Nokia confirms those numbers [this] week, it will be a very good start considering it launched Lumia in few countries, they are the first Windows Phones for Nokia, they were launched in the last year, with a new CEO and a huge change in company strategy,” he added.

Aside from smartphone sales, analysts are not expecting anything new in the rest of Nokia’s fourth-quarter report because it still faces the same competitive challenges it has been struggling with in recent years.

“In the past three years, Nokia has been squeezed by low-cost Asian players in the lower [end of the market] and the more sophisticated players in the higher end, like Apple and Samsung SSNLF +8.62%  , and it should be a continuation of that,” said Strategy Analytics’ Mawston.

“We’ll pretty much see a recurrence of what’s happened in past few quarters: volume and value under a little bit of pressure, a lackluster level of unit shipments and possibly profit margins that are not quite as healthy as they might once have been,” he said.

Pete Cunningham, principal analyst at technology-research firm Canalys, said that Nokia’s results may be disappointing, but will be in line with most other phone-makers, owing to a difficult quarter for many manufacturers.

“Because of the launch of the iPhone 4S, it has been a very competitive quarter, with two winners, Apple and Samsung, while the rest of the market struggled,” Cunningham said.

Onlookers agree that any outlook the firm gives next Thursday will be just as important as the figures it releases, as investors are keen to know how Nokia plans to move forward with its Microsoft partnership.

Cunningham expects Nokia to throw its weight behind its Microsoft products and said he is optimistic for the future of the project.

“Anyone expecting Nokia’s fortunes to change overnight is naive, but it’s the beginning of a long road back for Nokia,” Cunningham said.