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Nokia sells fewer phones, but losses trimmed

Nokia sells fewer phones, but losses trimmed
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Nokia’s shares tumbled after it announced a big fall in sales of its basic phones and it said it expected operating margins to deteriorate.

On the plus side its underlying losses were less than analysts has feared in the first three months of this year and there was a stronger performance from its Lumia smartphones, which bring in more profit.

It sold 5.6 million Lumia handsets in the first quarter, up from 4.4 million in the previous quarter and in line with expectations.

However the Finnish mobile phone maker sold 30 percent fewer phones than in the previous quarter and is burning through its cash reserves.

Shipments of mobile phones slumped 21 percent to 55.8 units, a far steeper decline than the eight percent fall that markets expected, with unit sales down in every region.

Elop running out of time

The results renewed pressure on Chief Executive Stephen Elop, who was hired in 2010 to turn the Finnish mobile phone maker around after falling behind rivals Samsung and Apple in the smartphone race.

He made the controversial decision to switch to Microsoft’s untried Windows Phone software in early 2011 and had said the transition would take two years, a period that is now over. Analysts said he was running out of time.

“Basically, he has only the second quarter,” said Mikko Ervasti at Finnish investment banking and wealth management group Evli.

‘Second-tier player’

Nokia’s future is seen as depending on higher-margin smartphones as a growing number of global consumers want access to apps such as Twitter from their handsets.

However, it also needs to protect its position in the basic phone market so buyers of its lower-end handsets do not defect to other brands when they eventually upgrade to smartphones.

In markets such as China, Nokia faces strong competition not only from rivals such as Samsung but also from emerging, cut-price competitors.

“The fall in numbers for the low-end devices is quite alarming,” said Nordea analyst Sami Sarkamies. “Even with Lumia doing better, we still care about those. Nokia is still a second-tier player in smartphones, and it’s only because of its position in mobile phones that it’s still relevant.”