London Calling: Nokia's Lumia hit by supply chain woes

I am a loyal Nokia mobile phone user and as a European I am pleased to see the company has got itself back into profit. But reading the small print of the company's fourth quarter financial results tells me that things are still not looking good for the former mobile phone market leader, and particularly for its flagship Lumia smartphone.

Having been the poster person for European consumer-facing technology for the best part of two decades Nokia's fall from grace as the number one phone company was rapid and spectacular. Nokia has now been bewildered and beleaguered for a couple of years having been beaten to the punch by Apple with the iPhone and Google by way of umpteen Android phone suppliers. But now, lo, it has produced a profitable set of financial results for the fourth quarter 2012.

The Finnish company said it made a net profit of 202 million euro (about $270 million) in the fourth quarter of 2012 but revenue fell 20 percent – to 8 billion euro (about $10.7 billion) from 10 billion euro (about $13.4 billion) – from the same quarter a year before.

So basically in 4Q12 Nokia sold 86.3 million phones down 24 percent on the same quarter a year before but up sequentially by 4 percent. A lot of the upside in the results is attributable to the communications infrastructure division, Nokia Siemens Networks, and if you look at the detail is it noticeable in the year-on-year comparison that smart device sales plunged by 55 percent from 2.747 billion euro to 1.225 billion euro. In unit terms sales went from 19.6 million in 4Q11 to 6.6 million units in 4Q12, according to the Nokia figures.

Strangely in its commentary the company said that it shipped 15.9 million smartphones of which 9.3 million Asha smartphones were classified as mobile phones and the remainder was 4.4 million Lumia phones and 2.2 million Symbian smartphones. Equally telling was the fact that Nokia's volumes of Lumia were constrained by supply shortages, which have continued into the first quarter of 2013, the company said.

Nokia didn't say whether the constraints are to do with shortages of processors, memory, glass, or some pesky connector. But it may reflect that when you are number one in a market you can throw your volume ordering weight around. Now that Nokia has slipped down the rankings it may well be that suppliers are saying: "Sorry Nokia but we have to look after Samsung and Apple. We will get round to you soon."
 
The other problem for Nokia is that I am almost certainly due an upgrade from my mobile phone service provider. And I can't be bothered to get one. After all it is just a phone and a smartphone is just a phone with graphics. And certainly I do not crave a Lumia smartphone in particular.

While one person's lack of brand loyalty – except by default – may not be a problem, I suspect there could be tens of millions of users like me and that would be a problem. And those that are not like me, the technofiles who must have the latest and most fashionable phone, have probably already got the Samsung Galaxy SIII.


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