Linked by Thom Holwerda on Tue 29th Oct 2013 15:04 UTC
PDAs, Cellphones, Wireless

Nokia has just announced its Q3 2013 financial results, revealing an operating profit of EUR118 million ($162 million) from EUR 5.66 billion ($7.8 billion) revenue. That's up massively year over year, but nonetheless represents another quarter of middling results. The report is the first since Microsoft agreed to purchase Nokia's phone business, and that division - Devices and Services - performed as expected, posting a small loss of EUR 86 million ($118 million).

So, Microsoft is buying the part of Nokia that is losing money, while the parts that make money remain in Finland. Seems like a good deal for Nokia-proper. In the meantime, Microsoft will be saddled with a devices division that is still losing money, and whose increase in sales consists largely of low-end, low-margin devices (like the 520). Interesting - especially since Windows Phone was supposed to prevent Nokia participating in a race to the bottom. I'm sure Microsoft's super-successful Surface division welcomes Nokia's devices division.

The cold truth: even more than 2.5 years after announcing the switch to Windows Phone, Nokia's Lumia range still cannot make up for drop in sales of Symbian devices and feature phones. This is roughly the same timeframe in which Samsung rose to the top. With Android.

Read into that what you will.

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RE[7]: Comment by Nelson
by mbpark on Tue 29th Oct 2013 22:42 UTC in reply to "RE[6]: Comment by Nelson"
mbpark
Member since:
2005-11-17

I went through the IFRS financials.

Nokia made out very well. They transfer a lot of employees out to Microsoft in the EU with its comprehensive social welfare systems. They get cold hard cash to pay off the $2.291B in financing they took this year which resulted in their high CFF. They keep the business units that make money.

Microsoft, depending on how they structure the deal with their international subsidiaries, will find a way to make money on a declining asset. Yes, they have high YoY, and you probably did make money. However, I don't see this making money for Microsoft without a few financial wizards figuring out how to bury the losses in the income and cash flow statements.

This much I will say for Nokia: They are moving to a higher-margin business where they provide middleware and mostly getting out of the consumer segment. NSN should provide higher margins.

Microsoft is a nice big company, but they fail to see beyond Windows, Office, Windows Server, Active Directory, Exchange, and Sharepoint. XBox is the exception. They're almost as bad as Dell at integrating their purchases. Microsoft needs someone like Gates to put it together at the top like he did, because Ballmer hasn't.

Speaking of which, Nokia wasted tons of money, and had poor leadership. At least Elop got some money for a division that couldn't put it together. Too bad that several good mobile operating systems were the casualty of their mismanagement.

Reply Parent Score: 6

RE[8]: Comment by Nelson
by Nelson on Wed 30th Oct 2013 00:33 in reply to "RE[7]: Comment by Nelson"
Nelson Member since:
2005-11-29

I went through the IFRS financials.

Nokia made out very well. They transfer a lot of employees out to Microsoft in the EU with its comprehensive social welfare systems. They get cold hard cash to pay off the $2.291B in financing they took this year which resulted in their high CFF. They keep the business units that make money.


I agree. I think people underestimate the enormous financial strain that employees have on a company beyond just a salary. It costs money to let people go.

Furthermore what the MSFT transaction did was pretty much ensure Nokia's financial survival. Their balance sheet will overnight look much better.

They are essentially a new company.


Microsoft, depending on how they structure the deal with their international subsidiaries, will find a way to make money on a declining asset. Yes, they have high YoY, and you probably did make money.


I think it all depends on how they ramp up volume. D&S on a non-IFRS basis actually is pretty close to break even.

If they can smoothly integrate Lumia (push it as a premier brand like Skype) and let Nokia more or less operate independently then I think they can work with less friction than before.

For example, Nokia as close as it was to Microsoft still kept secrets (and vice versa) which kept a lot of product planning in a less than optimal state.


However, I don't see this making money for Microsoft without a few financial wizards figuring out how to bury the losses in the income and cash flow statements.


Microsoft financials are pretty much indecipherable now due to the reorg. If Nokia makes losses it'll be hidden somewhere, if they make a profit or have a sharp revenue uptick I'm sure they'll let everybody know.

I really am going to hate trying to glean tidbits of information on D&S.


This much I will say for Nokia: They are moving to a higher-margin business where they provide middleware and mostly getting out of the consumer segment. NSN should provide higher margins.


I would've preferred them stay the course with HTC or someone else (Lenovo) forming a strategic partnership with Microsoft. What's done is done though, Nokia is now a very solid, if boring company.

Microsoft needs someone like Gates to put it together at the top like he did, because Ballmer hasn't.


I've said it before the guy in charge of Azure should run the company. To take Azure from shambles to the powerhouse it is now is nothing short of remarkable.

Reply Parent Score: 3

RE[9]: Comment by Nelson
by JAlexoid on Wed 30th Oct 2013 00:45 in reply to "RE[8]: Comment by Nelson"
JAlexoid Member since:
2009-05-19

Lumia (push it as a premier brand like Skype)

Unlike Skype, Lumia is not an established brand today. Nokia part of Nokia Lumia is.
Microsoft will have to establish that brand before they can integrate it into anything.

Reply Parent Score: 4