Nokia Sells 12 Million Smartphones, But Lowers Outlook

Nokia revised its first-quarter guidance Wednesday. While its smartphone sales show hope, a software bug marred the Lumia 900's U.S. launch.

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Nokia issued guidance Wednesday for its first- and second-quarter earnings, and the news is mixed. First, Nokia said that it has sold 12 million smartphones during the quarter, a sign that it is slowly turning its handset business around. However, the competitive environment and the time it has taken to launch Windows Phone-based smartphones have taken a major toll on the one-time market leader.

Windows Phone notched 2 million unit sales in the first quarter, with Nokia's outgoing Symbian platform making up the remaining 10 million smartphone sales. Windows Phone 7 devices accounted for 17% of Nokia's smartphone sales, compared to Symbian's still-large 83% share. This equation will eventually flip-flop over time.

The average selling price for Nokia's Symbian handsets was about 125 Euros (about $164) for the quarter. The ASP for Nokia's Windows Phone handsets, however, was a much-higher 220 Euros (about $289). Windows Phone accounted for 26% of Nokia's smartphone revenue, despite its lower unit sales, with Symbian taking in the remaining 74%.

Compared to previous quarters, however, Nokia's Symbian handset sales are tanking as consumers give up on the platform. Nokia is abandoning Symbian--very slowly--as it transitions its entire smartphone business to Windows Phone. The company launched the Lumia 800 in Europe and other markets in late 2011 and the Lumia 710 with T-Mobile USA in January. T-Mobile reports that the 710 has been a strong seller. The Lumia 900 went on sale through AT&T earlier this week.

[ Thinking about buying one of these new phones? Read Lumia 900: 5 Critical Questions Before You Buy. ]

"Within our Smart Devices business unit, we have established early momentum with Lumia, and we are increasing our investments in Lumia to achieve market success," said Nokia CEO Stephen Elop. "Our operator and distributor partners are providing solid support for Windows Phone as a third ecosystem, as evidenced most recently by the launch of the Lumia 900 by AT&T in the United States."

The launch has been anything but successful so far. AT&T launched the phone on Easter Sunday, a day that many retail stores were closed in observance of the religious holiday. Late Tuesday, Nokia also admitted that the Lumia 900 has a software bug that prevents it from properly accessing AT&T's network.

Nokia is addressing the issue, but stumbling out of the gate thus is not a great sign for Nokia. The company will issue a software update to fix the problem next week. In the meantime, Lumia 900 customers can apply for a $100 credit from Nokia, which will go toward their next AT&T bill. The credit effectively gives the 900 to customers for free, as it only cost $99 to begin with. The credit is being offered to all customers who purchase a Lumia 900 through April 21. Customers can also choose to exchange it for a new, fixed device.

Nokia's U.S. chief Chris Weber said, "We're already manufacturing devices with the new software. Those are being shipped to AT&T stores. The customer always comes first and I think we're showing it here."

Attacking a problem like this head-on and offering customers a credit is definitely the way to go, but it still stinks for Nokia. The company needs to fire on all cylinders if it truly wants to regain its stature as the smartphone leader, not ship flagship products with faulty software.

The 900's stumble and lowered outlook aside, Elop is still bullish about the company's prospects. "We are continuing to increase the clock speed of the company. The change is tangible, and we are proud of the way Nokia employees are quickly responding to the needs of consumers and partners."

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