Mixed Q3 signals from both Nokia and Apple
Apple smashes iPhone records but profits down; Nokia reduces devices losses but sees slowdown in the businesses it's keeping
Published: 30 October, 2013
Apple and Nokia reported quarterly results on the same day this year - the shift from its traditional Thursday just the first sign of the huge transition ahead for Nokia as it prepares to sell its handset business to Microsoft. While the gulf between the two firms in the device market was as gaping as ever - Nokia's 8.8m smartphones compared to Apple's 33.8m, not to mention an operating loss of $64.6m versus a profit of $7.5bn - both turned in mixed results.
Given their contrasting starting points, Nokia could be said to have the stronger signs of hope, while Apple continues to struggle to regain past glories. The Finnish firm, for instance, reduced the operating loss in its devices business to less than one-fifth of its year-ago size, from €252m in 3Q12 to €47m ($64.6m). This was despite a fall in device sales - down 19% year-on-year in revenue terms to €2.8bn, and down 22% in unit terms to 64.6m. This reflects the ongoing shift away from featurephones towards higher margin smartphones and the Asha 'smart featurephones'. The Lumia smartphone range increased its sales by almost 40% year-on-year to 8.8m units.
While that summary shows a rise in some key metrics for Nokia's device unit, and some hopeful signals for Microsoft, Apple saw net profit in its fiscal Q4 fall by 8.5% to $7.5bn, although it set a record for fiscal Q4 iPhone shipments, at 33.8m, up 25.6% on the year-ago period, and its overall revenues were up from $36bn in Q312 to $37.5bn.
Apart from squeezed profits, another sign of concern focused on the iPad, whose shipments were up by a measly (in Apple terms) 100,000, compared to last year, to reach 14.1m units.
One area where the contrast between Nokia and Apple is particularly glaring is in margin. Nokia predicts a non-IFRS operating margin of 12% in the final quarter of this year (plus or minus four percentage points). Apple is forecasting a gross margin of between 36.5% and 37.5% in the same period, along with revenue of between $55bn and $58bn, boosted by holiday quarter sales across its ranges.
Nokia CFO and interim president Timo Ihamuotila said the quarter was "among the most transformative in our company's history" as it prepares to transition to having just three businesses - NSN in wireless infrastructure, Here in mapping and the IPR and innovation unit, Advanced Technologies. However, he was not able to look ahead too bullishly to life without the dragdown factor of devices - sales slowed at both NSN and Here. NSN saw an operating profit of €166m, down 9% year-on-year, on sales of €2.59bn, down 26%. While the latter is to be expected, since its ongoing restructuring is designed to reduce its size and focus only on mobile broadband, it is also supposed to be improving profitability. Nokia also warned that NSN had seen "reduced wireless infrastructure deployment activity, which affected both Mobile Broadband and Global Services, and the net negative effect of foreign currency fluctuations".
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