A few days ago, we reported that Nokia had released preliminary financials for the fourth quarter of 2012 alongside a preliminary outlook for the first quarter of 2013, numbers which led some to reign in their gloom-and-doom speculation about everyone’s favorite Finnish underdog.
The company announced that its Devices & Services devision -the one responsible for smartphone sales- “achieved underlying profitability” in 4Q2012 and that its margin for that quarter likely fell “between break even and positive 2 percent.” Nokia sold 86.3 million smartphones in the fourth quarter, of which 4.4 million were Lumia-branded devices.
According to analysis by Forbes, Cnet, and others, the positive investor reaction to Nokia’s announcement likely has less to do with the figures themselves -as we pointed out, Nokia already achieved similar Lumia sales figures in 2Q2012- than with the company’s ability to beat previous estimates. Nokia itself commented in its own release that its performance in certain sales metrics was “better than expected,” a phrase which is deliberately headline-friendly, but which doesn’t give us much in the way of concrete data. We won’t get more detailed information until Nokia releases its full-year results on January 24, but there are a few more nuggets in the existing release worth mentioning.
Right up front, Nokia warns us to reign in our expectations for the first quarter of 2013. I don’t spent much time reading financial reports, but even I know this is a commonly seen disclaimer in end-of-year declarations. The holiday season’s gift-giving fever imparts a massive boost to most companies’ sales figures, and it follows that the comparably less-festive first quarter of the following year often results in a steep decline in profits. Nokia says in its press release that it “expects its non-IFRS Devices & Services operating margin in the first quarter 2013 to be approximately negative 2 percent, plus or minus four percentage points … based on Nokia’s expectations regarding … the first quarter being a seasonally weak quarter,” among others.
The dynamics of a company like Nokia, which is in the midst of a complicated recovery after a precipitous fall from prosperity, are complex, and it’s tempting for fans of the underdog to point to overly positive press releases as evidence that the ship is righting itself. In truth, turnarounds like this (continue to) take time. So while it’s nice to hear CEO Stephen Elop say in a press release that Devices & Services “exceeded expectations and delivered underlying profitability,” it’s discouraging that he finds it necessary to prop that statement up, in the same breath, with talk of financial success in the unrelated Nokia Siemens Networks division. It’s also telling that, in the portion of the release most digestible by the non-numerically-inclined, Nokia uses its Asha smartphone sales to bolster its Lumia numbers: “we sold a total of 14 million Asha smartphones and Lumia smartphones …” That right there is professional-grade padding.
But these are tricks of the trade seen in financial reports and press releases from companies of every stripe, even very successful ones. And Nokia’s health -inextricably linked with that of its symbiotic partner, Microsoft’s Windows Phone platform- looks decidedly brighter down at the “street level,” from a personal context.
The more time I spend in this business -and away from the often-acidic vitriol of internet message boards- the more I’ve come to realize that “anecdotal evidence” isn’t always the anti-truth that many claim. Firsthand experience, filtered through a balanced perspective, can offer valuable insight into a product’s health in the “real world.” And in the past few months, I’ve seen more Windows Phone devices on the street than ever before.
The product’s mind share, too, is growing: nowadays, when people see me take out my Lumia 920 on the street, they don’t ask “What’s that,” as they did of my Lumia 900 last spring. They ask me if it’s “the new Windows Phone,” much as people ask me if my Note II is “the new Galaxy.” You might say my city’s median age of 31 skews those results; these are relatively young people, hip to the trends and more likely to recognize a new gadget like Windows Phone anyway. That’s a fair point, but they’re also the people more likely to be in the market for new devices and new experiences, and more likely to be bored and tired of what’s been openly available for the past four or five years (i.e., Apple and Android).
Furthermore, the legion of reporters, bloggers, vloggers, and “brand influencers” who cover this industry are carrying more Windows Phones than ever before. Just ask any of us who covered CES how many times we reached in our pockets because we thought the jingle of a neighbor’s Lumia or 8X was ringing out from our own pocket. Even our resident Apple expert Jaime Rivera toted an 8X for most of the show – without complaining (much). That kind of saturation at the press level often trickles down.
The upshot is this: the future looks a bit brighter for Nokia than it did six months ago, but it’s anything but a cloudless sky overhead. I’m concerned about Microsoft’s recent embrace, as a Windows Phone preferred partner, of HTC; the Taiwanese firm is another underdog we frequently root for on the Pocketnow Weekly podcast, but HTC has a fallback in the form of Android – Nokia doesn’t. That, plus persistent rumors about Microsoft’s work on a Surface phone of its own, keep me on edge about the future of Finland’s erstwhile mobile-phone giant. Here’s hoping that, as the downsizing and corporate sell-offs inevitably continue amid management’s efforts to keep Nokia afloat, they don’t affect the work of the people crafting the innovative and remarkable technologies that make Nokia worth saving.