Nokia's Q4 Results: A Last Moment Of Hope... Before It All Collapses?

Nokia is so stoked about it's upcoming 2012 fourth-quarter earnings, it's leaking some of the numbers two weeks early, which has pushed the Finnish hardware maker's stock up in Thursday trading. But investors may want to hold off on their enthusiasm, because while Nokia is going to do better than expected in this past quarter's sales and revenue, the company is still woefully behind market leaders like Samsung and Apple. And it also seems to be stretching the classification of one product line as a "smartphone" to pad what sales numbers it does have in that category.

You know that scene near the end of Jaws? The one where the shark has wreaked havoc on the Orca and the boat is listing crazily but you think for half a moment that maybe that's it - the shark will abandon its attack and the intrepid crew will all make it back to shore? That's right about where I picture Nokia at this moment: That last silent moment of tiny hope that the worst is over - right before the giant robotic shark rises out of the water and tears them to pieces.

Nokia's Numbers Are Pretty Good

First, the numbers: The company announced Thursday that it has exceeded fourth quarter expectations with net sales of  €3.9 billion, pushing a total 86.3 million units out the door.

Of those units sold, the devices Nokia classifies as "Smart Devices" had "net sales of approximately €1.2 billion, with total volumes of 6.6 million units of which 4.4 million units were Nokia Lumia smartphones." (The rest of those Smart Device sales were 2.2 million Symbian smartphones.)

The Lumia sales are not only some good news for Nokia, but also for Microsoft, whose Windows Phone operating system powers the Lumia devices.

In the next line of Nokia's press release, though, the company apparently wants to lump sales of its Asha product line into the smartphone sales category as well.

"Total smartphone volumes of 15.9 million units composed of 9.3 million Asha full touch smartphones, 4.4 million Lumia smartphones and 2.2 million Symbian smartphones," the release states.

When Is A Smartphone Not A Smartphone?

That's a curious bit of wording, since Asha phones are classified in the industry as feature phones - the low-cost, small screen devices that still dominates mobile phone sales. Nokia appears to be taking the position that since the Asha phones, which run Nokia's S40 operating system, can fall into the smartphone category by virtue of the fact the phones include some apps, such as apps for Twitter and Facebook.

Nokia has positioned Asha line as a low-cost alternative to Android phones in developing markets within Asia and Latin America. The Asha 311, for example, retails for about $130 globally, right in the $100-$150 Android phone retail price ballpark, while the Asha 205 and 206 models.

But despite its positioning, the Asha has always been classified as a feature phone within the industry, and even Nokia hedges its boasting a bit by making sure to include Asha sales numbers within it broader Mobile Phone sales category. If media outlets report the "15.9 million smartphone units sold" number, though, it's doubtful Nokia's PR department is going to put out a lot of effort to correct them, especially since that number more than doubles the sales figures of what the rest of the sector actually calls smartphones.

Turnaround Special?

Still, Nokia's sales are a nice turn-around for the company, which has been suffering from declining sales for quite some time, even after the company chose to forego its established Symbian platform and the fledgling MeeGo operating system for the promise of a Windows Phone utopia in a Nokia-Microsoft partnership back in 2011.

But, just to put these numbers into perspective, in the same quarter of 2012, South Korean competitor Samsung sold 63 million smartphones alone, which is nearly three-quarters of the amount of total units Nokia sold. Matching up smartphone to smartphone sales, Samsung sold as many smartphones in ten days as Nokia did in the entire quarter.

Worse, Nokia itself isn't expecting this party to last. Today's preliminary announcement noted expected downturns in the first quarter of 2013.

"Seasonality and competitive environment are expected to have a negative impact on the first quarter 2013 underlying profitability for Devices & Services, compared to the fourth quarter 2012," the company reported. "Seasonality" is code for "Christmas is over, kids."

And "competitive environment"? That may be code for "we're still stuck selling these Windows Phones against Android and iOS"

 

Image courtesy of Shutterstock.