Smartphone sales of Finland-based Nokia has seen a slump with the company posting a 21 percent decline in net sales in Q4 2013.
The net sales for Q4 2013 was EUR 3.5 billion compared to EUR 4.41 billion in the same quarter last year.
On Thursday, January 23, Nokia reported that its popular line of Lumia Windows Phones suffered a sales slide in Q4 2013. Nokia's operating profit has declined from EUR 329 million in Q4 2012 to EUR 274 million in Q4 2013 as the company failed to attract consumers in the face of competition from bigger handset makers such as Samsung and Apple.
In 2013, Nokia's full year net sales were EUR 12.7 billion, down by 17 percent when compared to 2012.
"The fourth quarter of 2013 was a watershed moment in Nokia's history. Having received overwhelmingly strong support from our shareholders at our extraordinary general meeting in November for the sale of our phones business to Microsoft, we are diligently working towards defining Nokia's future direction. I am pleased with the progress we have made thus far in our strategy evaluation and excited by the opportunities ahead for each of our three continuing businesses: NSN, HERE and Advanced Technologies," said Risto Siilasmaa, Nokia Chairman and Interim CEO.
Microsoft is set to take over Nokia's handset business closing the deal at a reported $7 billion, but with sales seeing a drop, the million dollar question is whether Microsoft will be able to turn the tide in its favor. Siilasmaa seemed optimistic of the company's performance in the near term.
"During the fourth quarter, Nokia's continuing businesses produced a healthy underlying operating margin of 12%. While the first quarter of the year is seasonally weak for our continuing operations, we continue to expect the closing of the Microsoft transaction to significantly improve Nokia's earnings profile," said Siilasmaa.
While Nokia's Lumia line-up of Windows Phones shows promise, it remains to be seen if the device will be able to hold its own against iOS and Android. Nokia managed to sell 8.8 million Lumia handsets in Q3 2013, a record for the company. However, per the WSJ, this figure declined to 8.2 million units in Q4 2013.
Nokia confirms that it sold 8.2 million Lumias in 4Q.
— WSJ Nordics (@WSJNordics) January 23, 2014
The Nokia results were disappointing and may likely have repercussions on Microsoft.
"It was a bit of soft performance for Nokia in its final show," said Neil Mawston, from Strategy Analytics. "The operating loss was the main surprise of the result."
The Devices & Services unit which will make its way to Microsoft saw a steep decline in discontinued operation net sales from EUR 3.7 billion in Q4 2012 to EUR 2.6 billion in Q4 2013. Moreover, the unit recorded an operating loss of EUR 198 million, compared to the EUR 97 million profit in 2012.
When Microsoft announced its acquisition of Nokia, one of the primary reasons behind the purchase of the latter's handset business was to give a fillip to the former's position in the mobile phone space. Microsoft will now have to be more aggressive and proactive if it wants to turn things around and take on Android- and iOS-powered handsets.
Microsoft will also likely need to expand its reach in developing markets and lure consumers with attractive price points to stay competitive. Nokia revealed that it expects growth in its networks division in Africa, China and possibly the Middle East, which could work in Microsoft's favor.
