Nokia has posted a colossal operating loss of €487m for the second quarter of 2011 with the firm's grip on the feature phone market slipping as the price of smartphones continues to tumble.
The Finnish manufacturer sold just 71.8 million feature phones and 16.7 million smartphones in the quarter, down by 16 and 34 per cent respectively, compared to the same period in 2010.
This led to Nokia generating €9.3m in revenue, a decrease of seven per cent between the two quarters year on year.
Stephen Elop, chief executive of Nokia, admitted that the results were "clearly disappointing" and that the company had a big challenge on its hands to become competitive again.
"The challenges we are facing during our strategic transformation manifested in a greater than expected way in Q2 2011," he said in the Nokia Investor statement.
"During this time of transition, we expect competitive pressures to continue. However, we have a clear strategy to address the concerns about our product competitiveness."
Elop was keen to emphasise that Nokia's tie-up with Microsoft will help turn the company's fortunes around.
"Those who have already viewed our early Windows Phone work are very optimistic about the devices Nokia will bring to market and about the long-term opportunities," he continued.
"Early results of the dual-SIM product launches are very encouraging, and we are on track to deliver more products this year."
Nick Dillon, platforms and devices analyst at Ovum, suggested that a bleak financial report was expected as Nokia is going through a tough transition, and that picking the Android platform would not have produced a different outcome.
"The poor financial performance can't really be blamed on Elop, as he has made some tough decisions that have been put off for a long time," he told V3.
"It doesn't matter if Elop had chosen Android over Windows Phone back in February. The financial results would have been the same because that device is still not on the market."
Dillon said that the more worrying aspect of the figures was the slump in feature phone sales.
"The real surprise is the decrease in feature phone shipments, which was an area that Nokia has traditionally been strong in," he said.
Dillon added that the rest of 2011 will remain tough for Nokia as any positive impact from restructuring and the Windows Phone strategy is unlikely to be seen before mid-2012.
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