BERLIN — Nokia, struggling to reinvent its smartphone business around Microsoft’s
Windows software, said Thursday that it lost €929 million — about $1.2
billion — in the first quarter as sales plunged 29 percent amid flagging
demand for its lineup of older Symbian smartphones.
The loss contrasts to a profit of €344 million, or $451 million, one
year earlier. Sales in the most recent quarter fell to €7.4 billion from
€10.4 billion a year ago. In a statement, the Nokia president and chief
executive, Stephen Elop, said the company would accelerate cost-cutting
amid what he described as a mixed response to the new Lumia smartphones
with Microsoft’s Windows Phone operating system.
“Over the last year we have made progress on our new strategy, but we
have faced greater-than-expected competitive challenges,” Mr. Elop said.
Referring to the four Lumia smartphones now on sale, Mr. Elop said:
“The actual sales results have been mixed. We exceeded expectations in
markets including the United States, but establishing momentum in
certain markets including the U.K. has been more challenging.”
The company, based in Espoo, Finland, had warned investors last week of
its first-quarter loss, with losses continuing into the second quarter.

In addition to cutting costs, Nokia has said it will explore unspecified
“structural changes,” which some analysts interpreted to mean the sale
of business units, such as its 50 percent stake in Nokia Siemens, the
money-losing network equipment joint venture.
Nokia said it took a €772 million charge for restructuring efforts at Nokia Siemens.
Shares of Nokia rose 2.9 percent in Helsinki trading to €3.12.
Francisco Jeronimo, an analyst at International Data Corp. in London,
said that investors have been heartened to see gains in sales of the
Lumia lineup, which the company introduced last year. Nokia sold more
than 1 million Lumia phones during the fourth quarter of last year. In
the first quarter of this year, the number doubled to 2 million, at an
average selling price of €220.
“It took more than a year for Apple to sell more than 1 million iPhones in a quarter,” Mr. Jeronimo said. “And it took Google-Android more than 1.5 years to sell more than 1 million Android handsets. So judged by that measure, Nokia is doing well.”
In the short term, however, Nokia continues to suffer financially.
Sales in Nokia’s core devices and services division, which make up 60
percent of total sales, fell 40 percent in the quarter, to €4.24 billion
from €7.1 billion. Overall smartphone sales fell 52 percent in the
period, to €1.7 billion from €3.5 billion, reflecting weakness in
devices using the Symbian operating system, which Nokia is phasing out.

The number of smartphones shipped by Nokia to operators and other
sellers fell to 11.9 million from 24.2 million in the quarter.
Sales of basic cellphones, which account for the bulk of Nokia’s handset
revenue, also fell amid rising competition from low-cost Asian rivals
and pressure from Chinese mobile network operators, which are
aggressively discounting the prices of basic phones. The average selling
price for a basic phone fell by 18 percent, to €33 from €40 a year ago.

On Monday, Moody’s downgraded Nokia’s long- and short-term debt ratings,
citing the company’s deteriorating financial position and raising
questions about its ability to shift its smartphone business from
Symbian to Windows. Moody’s lowered its rating on Nokia’s senior debt to
Baaa3 from Baaa2 and its rating on short-term debt to Prime-3 from
Prime-2.
Moody’s warned that Nokia may also have to inject more money into Nokia
Siemens, its venture with the German conglomerate, which lost a combined
€986 million in 2010 and 2011. Nokia, in responding to the credit
downgrades, said Monday that it was on target to reduce production
overhead at Nokia Siemens by €1 billion a year, as well as to cut €1
billion from operating costs in its core devices and services business.

But losses at Nokia Siemens are accelerating. In the first quarter, the
venture had an operating loss of €1 billion after a €142 million loss a
year earlier. Sales fell 7 percent to €2.9 billion.