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Nokia-Lumia-1020-smartphoneNokia’s Devices & Services Group posted an operating loss of 326 million euros, or $452 million, in the quarter prior to Microsoft’s $7.2 billion acquisition of the group — illustrating the challenge that Microsoft will face as it absorbs Nokia’s smartphone business.

In its first-quarter earnings report, released overnight, Nokia blamed the decline in the devices group on factors including “intense smartphone competition at increasingly lower price points” plus the “strong momentum of competing smartphone platforms.”

Nokia said it was profitable excluding the results from the devices group. The company named executive Rajeev Suri as its new CEO, to lead its continuing operations in areas including networking and mapping services.

The company didn’t disclose unit sales for the Lumia line of Windows Phones, but said that sales of smart device declined compared to the fourth quarter of 2013, and were up compared to the same quarter a year ago. That puts the number somewhere between 6.1 million units (Nokia’s smart devices sales in the first quarter of 2013) and 8.2 million units (the results in the fourth quarter of 2013).

By comparison, Samsung, the dominant Android smartphone vendor, sold an estimated 89 million smartphones in the first quarter, and Apple sold more than 51 million iPhones.

The result demonstrates how Microsoft’s move further into hardware development will impact the company’s profit margins, at least in the short run. By acquiring the Nokia unit, the company says it expects a series of economic and product development efficiencies that it hopes will put Windows Phone in a better position over time.

Also See: Elop defends his Nokia tenure, promises faster innovation as part of Microsoft

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