BERLIN — Nokia, struggling to reinvent its smartphone business around Microsoft’s Windows software, said Thursday that it had lost €929 million in the first quarter as sales plunged 29 percent amid flagging demand for its older Symbian smartphone lineup.
The $1.2 billion loss at Nokia contrasts with a €344 million profit a year earlier. Sales fell to €7.4 billion in the quarter from €10.4 billion a year ago. The Nokia president and chief executive, Stephen Elop, said Nokia would accelerate its cost-cutting efforts amid what he described as a mixed response to its new Lumia smartphones with Microsoft.
“Clearly we are disappointed with our performance in the first quarter,” Mr. Elop said in an interview. “At the same time, the numbers mask the totality of what we have accomplished. Lumia is up and running in the U.S.A. We are clearly in the heart of the transition.”
Shares of Nokia fell 2.2 percent in Helsinki trading to €2.92.
The company, based in Espoo, Finland, had warned investors last week of its first-quarter loss, which it expects to continue into the second quarter. The company’s loss was exacerbated by a €772 million restructuring charge at Nokia Siemens Networks, its money-losing 50-50 network gear joint venture with Germany’s Siemens.
On Monday, Moody’s downgraded Nokia’s long- and short-term debt ratings, citing its deteriorating financial position and questioning its ability to successfully transition to Windows from Symbian. The ratings agency warned that Nokia may have to inject more money into Nokia Siemens, which lost a combined €986 million in 2010 and 2011.
Indeed, the situation appeared to worsen in the first quarter, as the venture’s operating loss grew to €1 billion after a €142 million loss a year earlier. Sales fell 7 percent to €2.9 billion.
Timo Ihamuotila, the Nokia chief financial officer, said Nokia Siemens was making progress to restructure the business and return to profitability.
Mr. Ihamuotila noted that Nokia Siemens Networks had 53 contracts to build new super-fast mobile networks using Long Term Evolution, or LTE, technology, which he said was more than competitors, which include Ericsson of Sweden and Huawei of China.
“They are executing very well into their strategy,” Mr. Ihamuotila said in an interview. “We as a shareholder are looking at NSN to improve operating performance and give us more options.”
Mr. Elop said Nokia was looking at “trajectories, the number of contracts and customer trends,” among other statistical bellwethers, to gauge Nokia Siemens’ future.
To counter the financial downturn, Nokia is pressing ahead with “substantial” additional cost cutting, Mr. Elop said, and is rapidly expanding where the Lumia is available. Sales of the Lumia 610, the least expensive model in the lineup, were set to begin in Asia next week in the Philippines.
In coming weeks, the phone will start selling in China, Singapore, Vietnam, Taiwan, Indonesia and Malaysia. Mr. Elop, who used to run Microsoft’s business software division before taking over the helm at Nokia, said sales of the Lumia 900 through AT&T Wireless in the United States had so far exceeded the company’s expectations.
Nokia was taking steps, Mr. Elop said, to increase the available stocks of the cellphones, some of which were running out amid strong demand. In Britain, however, Mr. Elop said Nokia was encountering difficulty raising awareness for Lumia, which was being overshadowed by Apple’s iPhone and handsets running Google’s Android operating system.
Mr. Elop said Nokia planned to increase advertising expenditures for Lumia in the second quarter, without giving specifics. To combat the erosion of Nokia’s basic cellphone business, Nokia will incorporate features like proxy browsing, an accelerated Internet browser commonly found on more expensive handsets, into its least expensive models.
Francisco Jeronimo, an analyst at International Data Corp. in London, said Nokia’s weak financial results had been largely expected by investors, who have been heartened to see gains in sales of the Lumia lineup, which the company introduced last year. Nokia sold more than a million Lumia phones during the fourth quarter of last year.
In the first quarter of this year, the number doubled to two million at an average selling price of €220. It took more than a year for Apple to sell more than two million iPhones consistently in a quarter, Mr. Jeronimo said. And it took Google more than a year and a half to do the same with Android, he added.
“So judged by that measure, Nokia is doing well,” Mr. Jeronimo said.
In the short term, however, Nokia continues to suffer.
Sales in Nokia’s core devices and services division, which make up 60 percent of total sales, fell 40 percent in the quarter to €4.24 billion from €7.1 billion. Sales of smartphones fell 52 percent in the period to €1.7 billion from €3.5 billion reflecting weakness in Symbian.
The number of smartphones — both Symbian and Lumia — shipped by Nokia to operators and other sellers fell to 11.9 million from 24.2 million in the quarter.
Sales of basic cellphones, which account for the bulk of Nokia’s handset business, fell also, amid rising competition from low-cost Asian rivals and pressure from Chinese mobile network operators, which are aggressively discounting the prices of basic phones. The average selling price for a basic Nokia phone fell by 18 percent to €33 from €40 a year ago.
“It is clear that Nokia is struggling with its smartphone business but now it looks like it is also struggling with its mobile phone business,” said Malik Saadi, an analyst at Informa Telecoms & Media in London.
Mr. Saadi attributed the difficulty to competition from low-cost Chinese handset makers and the recent move by operators in India and China to start promoting their own branded models, which is pushing prices for Nokia phones lower.
This article has been revised to reflect the following correction:
Correction: April 19, 2012
An earlier version of this article incorrectly stated that Nokia’s quarterly loss was $1.2 million, rather than $1.2 billion, because of an editing error.
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