By Michael Northcott Thursday, 24 January 2013

Profit at last! Nokia results signal better future

The phone manufacturing giant has finally managed to get its balance sheet back in profit, despite tough competition in the smartphone wars.

Recent years have proved a struggle for Finnish phone maker Nokia, after it was all but shoved out of the smartphone market by Apple and Samsung. But in the last three months of 2012, the firm swung back into profit.

It has had to suspend its dividend – for the first time in a century – and said that the outlook remains tough. But a 375m-euro pre-tax profit compares pretty favourably with the 974m-euro loss it suffered in the same period the previous year.

Look a little closer, and you’ll find that the firm still has a long way to go to get on an even keel. It sold 15.9 million smartphones in the final quarter of last year, which is down 4 million from 19.6 million it sold in the same period in 2011. So suspending the dividend is quite clearly aimed at improving the firm’s cash position. 

The chief executive, Stephen Elop, said: ‘We remain focused on moving through our transition, which includes continuing to improve our product competitiveness, accelerate the way we operate and manage our costs effectively. All of these efforts are aimed improving our financial performance and delivering more value to our shareholders.’

So where has the extra cash come from to get those profits? Well, the firm has shipped 4.4 million Lumia smartphone handsets, which come with a higher profit margin than some of the firm’s earlier smartphones, and much higher than the cheaper, more basic phones. 

If you include all the other devices Nokia produces, the total is nearer 86.3 million in the final quarter. Growing margins, a suspended dividend, oh…and 20,000 job losses, are definitely a way of keep cash in the business. So a long way to go, then.

But look elsewhere in the market, and there could be some room for Nokia to edge its way in. Apple fell short of its 50 million iPhone 5 sales target in its final quarter of 2012, hitting 47.8 million instead. Samsung is still dominating, but at lower price points, perhaps Nokia has a chance to take a bit out of Apple…

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