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Nokia sales take a big hit as buyers pass on its smartphones

The company's net loss balloons from €68 million to €969 million

Nokia continues to struggle as its third-quarter smartphone unit sales dropped by 63 percent compared to last year, while some warn that expectations for the arrival of its first phones based on Windows Phone 8 should not be too high.

The company reported third-quarter sales of ¬7.2 billion (US$9.4 billion), down 19 percent year-on-year, making a net loss of ¬969 million, compared to a net loss of ¬68 million a year earlier.

Nokia stands and falls with the number of phones its sells and how much it can charge for them, and the third quarter was a difficult one, the company said.

The company sold a total of 82.9 million mobile phones during the third quarter, of which 6.3 million were smartphones (including 2.9 million Lumia devices). That compares to 106.6 million phones, including 16.8 million smartphones, during the same period last year. The number of smartphones sold in the recent quarter is also far fewer than the 10.2 million sold during the second quarter this year.

The numbers highlight how important the upcoming Lumia 820 and Lumia 920, which are based on Windows Phone 8, are for the future of the company. They will go on sale during the fourth quarter in selected markets.

"The 820 and the 920 launch is absolutely critical. But high expectations should be kept in check, because these are two products that are launching halfway through Q4 into an extremely competitive market and they are expensive products," said Geoff Blaber, who leads mobile device research at CCS Insight.

The introduction of more low-end and low-cost Windows Phones is what will drive volumes for Nokia, according to Blaber.

The Lumia 820 and Lumia 920 were announced on Sept. 5.

However, not everything was doom and gloom during the third quarter: Excluding smartphones, unit sales increased by 4 percent thanks to the arrival of new Asha phones with touch screens.

"The Asha family is doing a good job competing with lower-end Android products. It underlines the fact that the mobile phone business is the engine that supports the smartphone transition," said Blaber.

Also, the Nokia Siemens Networks equipment business increased its net sales by 3 percent year-on-year.

Nokia expects the fourth quarter to again be a challenging quarter with a lower-than-normal benefit from the holiday shopping season, primarily due to the transition to Windows Phone 8 and its ramp-up plan for new devices, it said.

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