New phones fail to lift Nokia sales, profit drops

Helsinki: Nokia reported a 73 per cent fall in fourth-quarter earnings as sales of its new Windows Phones failed to dent the dominance of Apple's iPhone or compensate for diving sales of its own old smartphones.

The world's largest cellphone maker by volume last February unveiled a major strategy shift to Microsoft software for its smartphones in an attempt to challenge Apple and Google's Android. But Apple's phones in particular have proved far more popular.

Apple reported earlier this week sales of 37 million iPhones for the December quarter. Nokia has sold over 1 million Windows Phones since its launch in mid-November.

"It is more than some were expecting, but it's not going to worry Apple or Google," said analyst Nick Dillon from research firm Ovum.

Nokia said it expects its phone business' underlying earnings to be around breakeven in the first quarter, well below analysts forecasts, with sales falling more than usual in the seasonally weaker quarter.

Nokia's fourth-quarter core earnings per share of 0.06 euro were better than the market's expectation for 0.04 euro. The results were boosted by a $250 million payment from Microsoft as part of the Windows Phone sales deal.

Shares in the Nokia were up 1 per cent to €4.10 at 1526 GMT, regaining some ground lost over the past week following poor results from its suppliers.

Nokia proposed a €0.20-per-share dividend for 2011, slightly more than expected. Nokia's quarterly net loss totalled €1.1 billion (Dh5.2 billion), or €0.29 per share, due to a €1.1 billion writedown for its digital mapping assets.

At&T takes $6.7b hit

AT&T posted a $6.7 billion (Dh24.61 billion) quarterly loss due to a hefty break-up fee for its failed T-Mobile USA merger and other charges on top of costly subsidies for smartphones such as Apple's popular iPhone.

AT&T shares fell about 1 per cent after the news. While the No 2 US wireless provider beat analysts' expectations for subscriber additions, the growth came at a cost as its wireless service margins plummeted. It also took a big non-cash pension-related charge on top of its $4 billion break-up package.

While advanced devices like iPhone can help subscriber numbers and revenue, they also shrink earnings as operators like AT&T and its bigger rival Verizon Wireless heavily subsidise the device to attract customers to two-year contracts. AT&T's wireless service margin based on earnings before interest, tax, depreciation and amortisation dropped to 28.7 per cent from 43.7 per cent in the third quarter and 37.6 per cent a year earlier.

"If there's any reason to be upset, it certainly is the margins," said Stifel Nicolaus analyst Chris King, but he noted that strong smartphone sales should help AT&T in the long run.

The No 2 US mobile provider said it had added 717,000 subscribers in the quarter, beating the average expectation for 570,000 from seven analysts. But AT&T's subscriber growth still lagged well behind Verizon Wireless whose parent Verizon Communications reported on Tuesday that its wireless venture with Vodafone Group had added 1.2 million subscribers in the quarter. Verizon Wireless margins were also hurt by smartphone sales, but not as much as AT&T.

Roe Equity Research analyst Kevin Roe said that only time will tell if the race to sign on smartphone customers will be worth the massive drag on margins.