Nokia has released its Q3 2011 results, reporting an operating loss of -€71 million, with net sales of €8.980 billion (down 13% YoY). Nokia\'s Devices and Services division's profits were €132 million. Margins in devices and services were 2.4% (down from 11.3 % in Q3 2010 and up from -4.2% in Q2 2011). Total smartphone device sales were16.8 million, compared with 27.2 million units in Q3 2010 (down 34% YoY) and 16.7 million units in Q2 2011 (up 1%, QoQ). The results were ahead of expectations and suggest the company has started on the road to recovery.
Non-IFRS operating profit was €252million (down 60% YoY and down 36% QoQ), with Devices and Services non-IFRS profit at €22 million, and margins at 4.7%. Non-IFRS results exclude special items for all periods and can be seen as measures of underlying performances. In Q3 2011, these include charges related to restructuring (e.g.€111m in Devices and Services due to restructuring and associated costs) and a variety of charges related to acquisitions and similar (e.g. €24 million because of Accenture deal).
Nokia\'s overall mobile device volumes were 106.6million units, down 3% year on year, but up 20% sequentially. This was led by a strong sales of mobile phones (89.8 million units, up 8% year on year and 25% quarter on quarter) and the halt in the fall of smartphones shipments. However, Nokia is now the number 3 smartphone manufacturer, behind Apple and Samsung, as the small growth in shipment numbers (1%) was significantly behind overall market trends. Nonetheless, the slide in smartphone sales in the last two quarters has been halted, with leaner channel inventory being a key factor this quarter.
The stronger sales have, in part, been driven by lowering the price of devices, as indicated by a fall in the average sale priceper device. However, an increase in the devices and services margin suggests an improvement in operational efficiency, which means profits have not been impacted by the price cutting.
While the overall results do remain relatively weak, they do show signs of improvement, suggesting that Nokia is beginning to rebound from the poor performance on the last 12 months. Attention will now turn to the launch of the company\'s first Windows Phone devices, which are expected next week at the Nokia World conference. However, they may only have a small impact on Q4 results, as the new devices are expected to be available only in a limited number of markets in 2011. A much greater impact is expected in Q1 and Q2 of 2012.
A Reuters poll of analysts prior to therelease of the results predicted an underlying loss of €23 million, with smartphone shipments of 15.9 millon. Both the underlying profit and smartphone sales were therefore ahead of expectations. In response to the news, Nokia\'s share price is up approximately 10%.