Nokia (NYSE:NOK) is expected to release its Q2 2013 results before the market opens on July 18th. The former mobile industry leader has fallen on difficult times of late as its handset business is reeling under the effects of a slumping feature phone market amid a slow smartphone transition to Windows Phone.

In Q1, Nokia’s results were marred by a higher-than-expected decline in feature phone sales even as Lumia Windows Phones performed strongly in what is seasonally a weak quarter for smartphones. While Nokia’s future as a mobile phone player definitely depends on the success of its Lumia line, its near-term outlook is still heavily dependent on the feature phone business which not only accounts for a majority of its device revenues currently but is also the segment’s only profitable arm. It is in this regard that the performance of Nokia’s Asha line of feature phones in the emerging markets will be closely followed this earnings call and could be key to its profitability for the quarter.

The sales of the Lumia line of smartphones have on the other hand been steadily growing each quarter. Despite having not yet launched the low-cost Lumia 520 and 720 models in many markets, the company posted an impressive 27% growth in Lumia volumes last quarter. With the Lumia available at almost every price point currently (except the very low-end), Nokia’s Q2 results will provide us the first insights into Lumia’s ability to hold off competition from Android rivals in emerging markets. Nokia is however incurring huge expenses in marketing and pushing the Lumia into new markets, and this is likely to be a drag on profitability in the near-term. The company has therefore made a wise decision to buy out Siemens’ stake in their joint venture, Nokia Siemens Networks, which has been generating steady cash flows of late and is on its way to sustained profitability. NSN’s performance will be especially important for Nokia from this quarter on given that it will now be owning the business entirely and not just 50%.

By: DocMemory
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