Knockback for Nokia, good news for Microsoft ahead of takeover

Nokia says sales of its Lumia line of smartphones dropped during ts fourth quarter after a sustained period of growth (if not enough to make up for declining sales of handsets based on its own Symbian software, phased out after a marketing alliance with Microsoft that saw a switch to the US company's Windows Phone software platform).

The full-year picture is rosy. The Finnish company sold 30 million Lumias, compared to 13.3 million in 2012.

But it sold only 8.2 million Lumias in the three months to December 31, short of the 8.8 million it reached in the previous three months.

Microsoft, which is in the process of buying Nokia for $US7 billion, says it needs to sell around 50 million Lumias a year to break even on its phone business.

Overall, looking at combined smartphone and feature phone (or "dumbphone") sales, Nokia says its fourth-quarter handset revenue declined 29% from a year earlier to €2.63 billion ($3.56 billion), and fell 4.5% from the third quarter as the company made a net loss of €25 million.

Shares fell close to 10% as the results were released.

Better news at the mothership
Microsoft shares climbed 4% in after-hours trading as the company beat forecasts. Quarterly revenue was up 14% against the year-ago quarter to $US24.5 billion, and net income up 2.5% to $8.0 billion.

Last quarter, the company switched to reporting results across two main divisions: devices and consumer (D&C) and commercial.

Overall, D&C revenue was up 13%, to $12 billion, with weaker consumer PC sales more than offset by a 48% jump in hardware revenue to $US4.8 billion as Xbox sales proved stronger than expected (Microsoft sold  3.9 million Xbox One consoles, and 3.5 million Xbox 360 units in the December quarter; Sony recently said it sold 4 million units of its PlayStation 4).

The company did not break out a per-unit sales figure for its Surface line of tablet (for which it took a $US900 million write-down in its June quarter), but said Surface revenue was $US809 million - against a cost-of-sales of $930 million. 

Windows Phone software licensing and smartphone patent licensing revenue rose 50% to $US1 billion.

In the commercial division, sales jumpeded 9.9% to $US12.67 billion as revenue from cloud services doubled - mainly due to strong Office 365 uptake.

Windows sales did fall - reflecting a shrinking PC market - but only by 3% as consumer PC sales dropped sharply but business PC sales, an associated Windows volume licensing revenue, grew for the third quarter in a row. The company has a potential Windows boom on its hands - if not for entirely positive reasons - as it prepares to finally phase out Windows XP support in April. In New Zealand, Microsoft recently estimated 25% of business PCs were still running the 13-year-old operating system.

In August last year, Microsoft boss Steve Ballmer said he planned to resign within 12 months. The company is still in the process of recruiting a new CEO.