Nokia Earnings Preview: The Lumia Question

Nokia will report its fourth-quarter 2013 earnings tomorrow, a seminal moment for the company as the figures will represent the last full period in which it will own the hardware assets that it is selling to Microsoft.

It also matters as Nokia’s Lumia Windows Phone sales in the quarter will provide a report card of sorts for Microsoft. Given that Nokia makes and sells the vast majority of Windows Phone devices, its sales are proxy for the larger market for the phones. So if Nokia had a good quarter selling Lumias, Microsoft had a good quarter selling Windows Phones.

Microsoft will report its earnings later in the day.

Nokia sold 8.8 million Lumia devices in the third quarter of 2013. Given extant growth trends, we would expect Nokia to sell more phones in the fourth quarter. Add the simple fact that the period includes the holiday sales cycle, and we expect another bump. This means that Nokia should sell — easily — more than 10 million Lumia handsets in the quarter.

The stakes here are high for Nokia, given that it’s hard to win in this context, but very easy to lose. If it sells 11.5 million handsets instead of 11 I doubt people will laud it. But a weak number could cast a pall. The irony is that the asset in question is what the company is selling, so a negative result may not have as sharp an impact on its share price as it otherwise might.

Investors are expecting Nokia to earn around €0.08 ($0.11) in the quarter on revenue of €6.4 billion ($8.671 billion). It will be interesting to parse the company’s earnings as it intends to mark the assets it is selling as discontinued businesses. Nokia will dramatically change once it and Microsoft clear the final regulatory hurdles that sit between their consummation.

For the full-year period, Nokia is expected to earn €0.07 ($0.09) (on aggregate revenue of €23.7 billion ($32.11 billion) in revenue. That latter figure is a firm decline from its 2012 tally of €30.2 billion ($40.92 billion). And Nokia, selling off another chunk of revenue, is about to slim again.

So that’s that. Keep your eye on the Lumia number, as it matters for both firms.

Top Image Credit: Flickr