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Nokia's Q2 Sales Plummet 24%, Hurt by Feature Phones

Nokia's Q2 Sales Plummet 24%, Hurt by Feature Phones
By Seth Fitzgerald

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Sales in China -- the world's largest smartphone market -- were down 57 percent, even though the Lumia 520 had a "strong start" in that country, Nokia said. As bad as Nokia is doing in the Western markets of Europe and the U.S., its biggest losses are coming from the increasingly important markets of India and China.
 


Finnish cell phone maker Nokia is spiraling downward even faster than before, with its second-quarter sales report showing a 24 percent decline. Sales for Q2 fell to $7.49 billion, down from $9.8 billion in the same period last year.

Analysts had expected to see Nokia's sales reach at least $8 billion for the quarter, but the company was unable to sell anywhere near the number of units required for that type of revenue. As domination by Apple and Android devices has grown, Nokia has found it difficult to successfully transition into the smartphone era.

What Is It Doing Wrong?

The biggest hurdle Nokia faces is the rough transition from feature phones to smartphones. Sales for feature phones have fallen 20 percent year-on-year and even Nokia's collection of Lumia Windows Phones has received minimal attention compared with iPhones and Android devices.

Nokia's 2010 partnership with Microsoft has only produced a limited number of Lumia smartphones, which were equal to less than 20 percent of Nokia's sales in 2012. Without getting rid of almost all of its basic handsets, Nokia is not going to be able to compete in the current smartphone market which is the primary reason for its plummeting market share and revenue.

Refreshing the Brand

Completely rethinking the Nokia brand is practically required at this point in order for the company's revenue to begin increasing again, along with its overall control of the market.

Analyst Jeff Kagan said a refresh of Nokia's brand is necessary for the company to be successful moving forward.

"[Today's] growth in wireless is not about regular handsets, it's about smartphones," Kagan told us. "What Nokia needs to do is focus on rebranding itself. Refreshing their brand. Make their brand important and connected with the marketplace. It's as simple as that, but they don't seem to understand that simple premise."

Without aiming its attention at smartphones, Nokia will be a relatively weak company within a few years, Kagan said. Even as Nokia is reporting that sales of its Lumia smartphones have doubled, feature phones still make up 88 percent of the company's sales.

Emerging Markets

As bad as Nokia is doing in the Western markets of Europe and the U.S., its biggest losses are coming from the increasingly important markets of India and China. Nokia said sales in China -- the world's largest smartphone market -- are down 57 percent even though the Lumia 520 had a "strong start" in the country.

Since Apple has continued to shy away from most Asian countries and it has been weak in China, Nokia has a prime opportunity as the third-largest cell phone manufacturer to dominate overseas. However, Nokia has no choice but to shift its focus off feature phones in order to do so.
 

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