A Closer Look at Nokia’s Earnings

Yesterday Nokia posted their Q2 earnings of 2013, with a modest sale total of 7.4 Million Lumias (the largest till date). Still 7.4 isn’t much compared to the 10s of millions of Galaxy S4s and iPhones sold; but it’s no longer the feeble 2-3 million of yester-year. Reddit user  youhavethenerve posted his opinion/thoughts on Nokia’s quarterly earnings and what it means, and it’s a very nice read check it out::

first, I’m going to state the obvious: I’m slightly disappointed in Q2. After crunching the numbers, however, I believe there are more positives than negatives this release.

Other shareholders seem to share my opinion since the stock price has recovered from $3.88/share at opening to $4.02/share at midday. At various points today, Nokia’s share price has exceeded yesterday’s close of $4.04.

What exactly is going on?

Good News

Nokia sold 7.4M Lumias. This falls 600,000 short of my target of 8M. I said previously that if Nokia hit my target, Elop’s turnaround strategy should be deemed a success.

So while I don’t yet feel Nokia is yet out of the woods, Elop is inching tantalizingly close. The Guardian notes: “Nokia is now selling comparable volumes to the second-tier Android OEMs” – such as Sony, LG and HTC.”

Even better, Lumia’s sales volumes have exceeded Blackberry’s for the first time. This confirms Microsoft’s strategy of positioning Windows Phone 8 as the 3rd ecosystem.

However, this statistic speaks more towards how badly Blackberry is doing rather than how well Nokia is succeeding. So how exactly is Nokia succeeding?

To answer this question, one must look at what exact models make up the majority of Lumia sales.

The Growth of Nokia’s Midrange

When I speak about the smartphone midrange, I’m taking a global perspective into account. From this angle, companies likeKarbonn and Micromax comnand the low end with sub-$100 smartphones.

Hence the Lumia 520, 620, and 720 must be seen as midrange phones. It is these phones, specifically, that are responsible for the growth of Lumia sales volume, and will continue the upward trend into Q3.

The Lumia 620 and 720 have shown especial success in Asian markets, particularly in India, Thailand, and Vietnam.

But the real star of the show is the Lumia 520. This model has become a global hit — even in the US where Nokia has otherwise performed poorly. The Lumia 520’s price is the secret sauce for its success, but for reasons that may not be obvious.

In mature markets like the USA, the Lumia 520 is seen as a budget phone. For $130 on a non-contract price, you get a high-performance phone. Here the Lumia 520 is seen as way to dip your toe into the Windows Phone ecosystem without any commitment.

This contrasts with emerging markets like India where the Lumia 520 is much more expensive than competitive Android OEMs. Here the appeal of the Lumia 520 is that, for a few more rupees, one can have a premium smartphone experience.

What about the high end?

As predicted, attention towards the Lumia 920 has not sustained in Q2. This is especially the case in the USA where Lumia sales contracted from a volume of 600,000 to 500,000.

I therefore have additional skepticism in regards to the Lumia 928 on Verizon and the Lumia 925 on T-Mobile. Specifically, I believe T-Mobile’s lack of enthusiasm for the Lumia 925 will result in negligible sales.

While the Lumia 920 has dwindled during Q2 in succeeded in one important aspect: it established the Lumia brand as a leader in cameraphone technology — which Nokia later punctuated with further releases of Lumia 920 variants as well as the Lumia 1020 announcement.

The message is clear. If you are serious about mobile photography, you need a Lumia.

The death of featurephones and the (hopeful) rise of the sub-$100 Lumia

The most important news regarding Nokia is that the featurephone market has contracted by 4% from Q1. Nokia sold appr. 54 million feature phones this quarter.

The Asha series continues to soften the blow in falling featurephones sales — even though Asha sales fell from a volume 5M to 4.3M. Initial sales of the Asha 501 seem encouraging, and may buffer Nokia’s presence in the sub-$100 range.

But let’s not kid ourselves. The Asha series has no longterm chance of survival as low-end Android continue to kill featurephones. At best, it’s a stop gap solution.

What Nokia clearly needs is a sub-$100 Windows Phone that replaces the Asha 501. A low-end Windows Phone will give customers in emerging markets a reason to invest in Nokia’s future. As much as the Windows Phone ecosystem is given flack for lack of apps, the 150,000+ apps trounces what’s available on Asha’s modified S40 platform.

In addition, if Nokia manages to release a sub-$100 Lumia, the performance gap between low-end Android and Windows Phone will become more apparent. If you think Android budget phones in the USA experience performance lag, that’s nothing compared to what they’re like in emerging markets.

The best part of the Lumia 1020 isn’t the camera tech

The most exciting part about the Lumia 1020 isn’t its camera technology but it’s release date.

As you may recall, the Lumia 920’s sales suffered because Nokia waited 2 months after its initial announcement to release the product. This resulted in loss of mindshare — especially since the iPhone 5 was announced later than the Lumia 920 but released earlier.

Thankfully, Nokia has learned its lesson. Within a month of the Lumia 1020’s announcement, the smartphone will be released. As it stands, the pre-release orders are now sold out — the biggest concern now is whether Nokia can keep up with demand.

That said, the most important aspect in building mindshare is getting the phone in the hands of its biggest boosters. While only a few customers will get their hands on a Lumia 1020 on release date, these few will create massive buzz for the product.

As more photos from the Lumia 1020 find their way online, I have no doubt that the Lumia’s reputation for fantastic imaging will reach a fever pitch.

That said, I don’t see the Lumia 1020 as a huge moneymaker for Nokia. It will, however, have a halo effect on Nokia’s midrange phones.

In short, the Lumia 1020 is Nokia’s equivalent of a Ford Shelby GT500. The Shelby GT500 may not sell a whole lot, but boy, does it make you want to check out Ford’s other offerings.

Source

Category: Lumia, Nokia, Windows Phone