Update: Nokia reports loss ahead of first Windows Phone launch

Nokia will start selling smartphones running Microsoft's Windows Phone software before the end of the year in some markets

Nokia reported a net loss and a fall in revenue for the third quarter, despite selling more phones than analysts had expected.

The company reported sales of €8.98 billion ($12.33 billion), down 13 percent year on year, making a net loss of €68 million, compared to a net profit of €529 million a year earlier.

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The company stands and falls with its phone sales. During the third quarter it sold 106.6 million phones, down from 110.4 million during the same period last year, but still more than analyst Geoff Blaber of CCS Insight had expected.

However, users paid much less for their Nokia devices: the average selling price dropped from €65 to €51.

"It is is clear that Nokia priced aggressively to drive volume," said Blaber.

Although the lack of competitive smartphones is the main reason for Nokia's current troubles, a lack of dual-SIM phones has also hurt the phone maker in the past. Now, however, Nokia's introduction of dual-SIM phones for emerging markets has helped prop up sales, Blaber said.

Nokia shipped about 18 million dual-SIM devices in the third quarter, it said, allowing it to gain market share in places such as India, where dual-SIM phones are popular.

Nokia also sold 16.8 million smartphones during the third quarter, leaving the Finnish company once again behind Apple, which sold 17.07 million iPhones. A year ago, Nokia sold 27.1 million smartphones and Apple shipped 14.1 million iPhones.

More than eight months have gone by since Nokia announced its decision to go with Microsoft Windows Phone. Next week, the work the company has done since then is expected to bear fruit, as the company will likely announce its first product or products at the Nokia World event in London.

"In reality, what Nokia does next week will be more important that these results," said Blaber.

The results were the "best-case scenario" for Nokia, and in London the company has to show how it plans to grow next year with the help of Windows Phone, according to Blaber.

Nokia said it will sell Windows Phone-based smartphones "to consumers in select countries later this quarter" and then "systematically increase the number of countries and launch partners during the course of 2012."

The company isn't detailing the countries where its products will be available first, but during a conference call on the third-quarter results CEO Stephen Elop gave some insight into why Nokia isn't going global from day one.

"We are being very deliberate in the sequence in which we roll things out, because it is a significant shift for the organization in how we sell, how we manufacture, all of those different elements," he said.

The work Nokia has to do includes new language variants of Windows Phone, establishing marketplace capabilities in new countries to support the OS, and activating operator billing, according to Elop.

"It is quite a long list of things we have to do to ensure we have robust launches in each country," he said.

Elop was also asked about how Nokia will differentiate its Windows Phone-based products: "Clearly we have strengths in design, hardware and mechanics and a variety of things, and are going to be quite proud to show our work in that area," he said, and also promised "unique Nokia capabilities in the form of applications and services."

In the short term, it is more important to differentiate Nokia's smartphones from competing products from Apple and the Android camp, as opposed to other Windows Phone-based devices, according to Elop.

"Next week, we have Nokia World and I think it is going to be pretty exciting. I know for everyone at Nokia it is going to be a very proud moment," said Elop.

Send news tips and comments to mikael_ricknas@idg.com.

Copyright © 2011 IDG Communications, Inc.

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