Overhead is high because the dumbphone segment underperformed relative to smart devices, so the smart devices got a big part of overhead. This means the dumbphone needs to be trimmed down, workers reschooled and factories revamped wich means more restructuring and one time charges. Another burning platform, yes. But they can do it with cash reserves and rising Lumia sales. They showed they could do it with Symbian, now a second round. So, yes, the segment is unprofitable. It hurts that the main segment is crumbling down so fast.
This is probable the reason for the depressed price, as the charges will be comming for a 2nd round but hopefully less cash intesive, like i said, with rising Lumia sales.
All eyes even more on the Lumia performance. The potential is still huge IMO. I dont think many believed Nokia's cash-future lied with the dumb phones. And if you did, im sure that hope is crushed.
Thank you for noting that. I was too quick with my assuptions. Nonetheless if you read the note going with it :
Note 2: The year-on-year and sequential changes in operating expenses were affected by the proportionate allocation of operating expenses being
affected by the relative mix of sales and gross profit performance between Mobile Phones and Smart Devices, resulting in higher relative allocations to
Smart Devices in the first quarter 2013. Accordingly, first quarter 2013 operating expenses are not directly comparable to first and fourth quarters 2012
They distributed overhead from the dumbphones to the Lumia/Asha division, making that look worse then it is. As the dumbphones dwindle down and they transform to pure smarth device player, so should the overall overhead costs come down.
The need each other. It seems a pretty healthy win win to me. Much healther then the Samsung-Google relationship. If MSFT let NOK fail they will lose time. If WP takes off Lumia = WP and Nokia has a headstart on competition.
Average price selling of Lumia was 198€ with 21% margins. They sold 5.6 and expect 7.1 in Q2. Lets assume Q3 will be 5m and Q4 will be 10m. They sell 27.7m Lumia's and its only just beginning. 27.7m lumia's on average sell rice of 198€ is 5.4 billion turnover on Lumia alone. With 20% margins this means 1.1 billion on the Lumia's alone.
Not pumping, just showing off the potential.
I'm hoping the can adjust ASAP without too many costs. Like retraining staff and adjusting product lines to go from dumb to smartphone.