Nokia (NOK) Cuts Dividend, Battens-Down Hatches, and Ekes Out Q4 Profit

January 24, 2013 9:35 AM EST
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Nokia (NYSE: NOK) reported strong fourth-quarter results earlier Thursday, though investors might be taking a little off the top following preliminary numbers released on January 10th. Since then, shares have risen over 23 percent.

In 2012 Nokia’s cash position declined by €1.2 billion to €4.4 billion, and in an effort to conserve cash the Finnish company today suspended its dividend for the first time in a more than a century.

In Q4 Nokia reported revenue of €8.04 billion, versus €10.01 billion reported last year. This represents a decline of 20 percent. Devices & Services net sales fell 36 percent to €3.85 billion, with net profit of €52 million.

On a positive note, the company was profitable in Q4, with EPS of €0.06. Nokia also increased its cash position, adding €800 to its balance sheet.

Average selling price (ASP) for Devices & Services slipped 15 percent to €45 in the quarter with total mobile device volume down 24 percent to 86.3 million units. As mentioned earlier in January, about 4.4 million Lumia smartphones were shipped in the quarter, while 9.3 million Asha smartphones were sold.

Channel inventory was to the higher-end of Nokia's normal four to six week range at the end of the quarter.

While European Devices & Services sales fell 37 percent, Nokia reported a 270 percent gain in North America sales to €196 million. Mobile device volume in North America rose 40 percent to 0.7 million, while Europe saw a 23 percent drop to 19.4 million.

Smart device volume sank 66 percent to 6.6 million, though ASP rose 33 percent to €186. Overall sales for the segment were down 55 percent to €1.23 billion.

On the topic of Maps, Nokia reported a 9 percent drop in Location & Commerce sales to €278 million, though the number was up 5 percent sequentially.

“While the first half of 2012 was difficult for Nokia Group, in Q4 2012 we strengthened our financial position, improved our underlying operating margin in Devices & Services, introduced the HERE brand to expand our mapping and location experiences, and drove record profitability in Nokia Siemens Networks,” said CEO Stephan Elop.

Nokia will also suspend its dividend for the first time in 143 years. According to market data, Nokia would have had to shell out about €750 million from reserves and, with its cash position at about €4.4 billion, Nokia will have more financial flexibility moving forward.

Looking ahead, Nokia sees Devices & Services non-IFRS operating margin in the first quarter 2013 to be approximately negative 2 percent, plus or minus four percentage points.

Nokia is trading down early Thursday.

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