No Samsung No Apple Nokia on the top
Nokia reports its spring quarter on Thursday — and the stakes are very high, indeed. The substantial spring revenue weakness from BlackBerry and HTC implies that many second-tier brands are now in serious trouble with their brand new product launches. Samsung’s earnings miss was a shocker because the South Korean giant was supposed to have a wide open shot at dominating spring sales, particularly because Apple’s iPhone sales started slowing down significantly in the March quarter. The industry is now staring at the possibility of the entire high-end smartphone market slowing down much faster than expected. But Nokia is not dependent on high-end smartphones to the extent that BlackBerry and HTC are — and that makes Nokia’s spring report absolutely riveting.
Nokia has two black boxes in its June quarter performance: feature phone sales and the super cheap Lumia 520 smartphone sales. Estimating either is fiendishly difficult.
The company’s feature phone sales hinge on Africa, Middle East, Brazil and South-East Asia, and all leading brokerages have great trouble getting any sense of what is going on there. Wall Street underestimated Nokia’s low-end sales badly in Q2 2012 and Q3 2012, and then overestimated them grossly in Q1 2013. After Nokia’s feature phone shipments plunged to under 56 million units in the March quarter, it now has to deliver at least 54-55 million units to prevent a freak-out over how fast this business is eroding. This is a unique problem for Nokia; its major rivals have all pulled out of the feature phone market, fearful of its collapse.
Another mystery is the sales volume of the Lumia 520, which is the first true budget device in Nokia’s new Windows Phone 8 range. Its non-subsidized price dropped well under $200 during the June quarter, but there was a series of unusual sell-outs of this device in countries like India and America during April and May. Does Nokia have a big Windows Phone volume hit on its hands with the 520 – and how does it impact the average sales price (ASP) of smartphones? If Nokia did achieve a big Lumia 520 volume in the spring, its smartphone margin will probably give us strong clues about how profitably Nokia can sell such a cheap device.
Wall Street is all over the place. The revenue consensus ranges from 5.9 billion euros to 7 billion euros. The smartphone sales expectation is high; investors want volumes to vault from 6.1 million units in Q1 to 8 million units in Q2. But even here there is ambiguity about what would be ”good” volume. If Nokia beats the smartphone volume consensus but delivers surprisingly low ASP and margins, that is going to be taken as an indication that the 520 is eroding the profitability of the division.
What Nokia really needs right now is a smartphone volume of 8.1 million or higher with sequential ASP decline from the March quarter that is 2.8% or lower. That is a delicate needle to thread.
Posted on July 17, 2013, in Uncategorized and tagged Apple, BlackBerry, htc, iPhone, New Nokia Lumia 1020, Nokia, NOKIA NEW PHONE, Nokia profits of 2013, Nokia profits of Lumia, samsung, Wall Street, Window Phone. Bookmark the permalink. 3 Comments.