All the talk about Nokia’s handset business is distracting from the fact its Nokia Siemens joint venture is also in dire trouble.
The infrastructure division saw its operating loss hit €1 billion (€1.31 billion) during 1Q12 compared to a more modest €142 million loss in 1Q11, pitching it a close second to the devices and services business in terms of dragging Nokia into the red in the recent quarter.
Nokia’s slipped to an operating loss of €1.3 billion in 1Q12 from a €429 million profit in 1Q11, as none of its business units managed to turn a profit during the period.
The firm’s devices and services unit suffered a 40% drop in sales year-on-year, resulting in an operating loss of €219 million compared to a profit of €729 million in 1Q11. Nokia’s location and commerce unit offered some hope, cutting its losses from €132 million in 1Q11 to €94 million this quarter.
Despite predicting a sharp improvement in NSN’s operating margin during 2Q12, Nokia concedes it doesn’t know when the division’s profitability will improve while restructuring efforts are in progress. Operating margin for the devices business is tipped to remain around the -5.2% level recorded in 1Q12.
WestLB analyst Thomas Langer told Bloomberg the business must generate a margin of 5% or better in the coming months to avoid becoming a burden to Nokia.
Nokia chief Stephen Elop claimed the firm “faced greater than expected competitive challenges,” during the first quarter, but pledged to “move our strategy forward even faster,” in terms of the devices business. However, analysts say the heat is now on Elop to deliver on his smartphone strategy, tipping investors to be looking for clear progress by the year-end, Reuters reports.