Analysts say Nokia should sell low-end phone biz

Nokia Oyj’s loss reporting has prompted analysts’ suggestions that the Finnish phone maker sell its low-end phone business, whose revenue slumped by a third last quarter.

Yesterday, the Finnish company reported a surprise operating loss at its handset unit for the first three months and forecast no improvement this quarter. While sales of the Lumia model it developed with Microsoft Corp topped estimates, competition ate into margins and sales of lower-priced devices plunged in emerging markets.

Nokia Chief Executive Officer Stephen Elop will have to consider more radical steps such as selling its low-end phone business, said Adnaan Ahmad, an analyst at Berenberg Bank in London.

Nokia makes about 70 per cent of its handset sales outside Europe and North America, where competition from Chinese companies is intensifying. “Why not try to sell its mobile-phone business and hence just remain a smart devices company?” said Ahmad, who has been covering the telecommunications industry for more than a decade and is ranked fourth based on the total return of his Nokia rating over the past year according to Bloomberg data.

“They may sell their low end business to a Chinese maker, they may sell some IP assets — we know there’s a market for that, we know Microsoft is interested in that kind of thing,” said Horace Dediu, a former Nokia analyst who now runs the Asymco industry-research website. “Then they would essentially become a Motorola, which is a smartphone-only company that ended up getting acquired.”

Nokia reported an operating loss of about three per cent of sales at the devices and services division last quarter, citing weak sales in India, West Asia, Africa and China.

Elop, 48, shifted to Microsoft’s Windows Phone system 14 months ago, after determining Nokia’s Symbian and Meego couldn’t keep up with Google Inc’s Android system and the iPhone.