A Leaner Nokia on the path of profitability

Nokia Corporation invests in technological devices. The Company is focused on three businesses: network infrastructure software, hardware and services, which it offers through Networks; location intelligence, which is provided through HERE, and advanced technology development and licensing, which the Company pursues through Technologies.

Nokia reports better 2nd Quarter results and reduce its net operating loss

The net sales for second quarter ended April 2014 stood at €2.9 billion, a decrease of 7% from the same period in the prior year and an increase of 10% sequentially from the previous quarter. The second quarter gross margin remained unchanged at 44% from the same period in the prior year. The quarter also marked the completion of sale of substantially all of the Devices & Services business to Microsoft.

Nokia’s revenues for the fiscal year 2013 declined by 17% to €12.7 billion when compared to its last fiscal year. This decline was primarily due to lower Network and HERE earnings, two of the three business that Nokia operates in. Despite the slide in earnings Nokia’s Gross margins increased by 6% points in 2013 from the prior year. The divestment of less profitable business which was well complemented with great product mix helped contribute to this increase.

Nokia’s operating profit for the fiscal year 2013 was €519 million, which was a significant improvement over the prior year when it posted an operating loss of €821 million. This increase in operating margins partially diminished the huge net operating loss that the company recorded in 2012 at €3.7 billion. Consequently, the Net Income for fiscal year 2013 came in at much improved loss of €739 million.

Nokia resumes its dividend policy

Nokia Group’s total earnings per share in 2013 increased to € (-0.17) when compared to € (-0.84) in 2012. However the EPS of € (-0.84) in 2012 was a reduction of €0.53 Euros from the fiscal year 2011 that led Nokia to suspend its dividends for the first time in 143 years as Finnish Mobile struggled against falling device sales and intense competition from Apple and Samsung. For the year 2013, Nokia resolved to pay dividend of €0.37 per share which comprises of an ordinary dividend of EUR 0.11 and a special dividend of EUR 0.26 per share.

A strong balance sheet

Nokia ended Q2 2014 with a strong balance sheet and solid cash position with gross cash of EUR 9.0 billion compared to EUR 6.9 billion respectively, at the end of Q1 2014. This increase in liquid assets was primarily due to proceeds from the sale of substantially all of the Devices & Services business to Microsoft. Also the company started a capital structure optimization program and reduced the €950 million of debt related to Nokia networks. As reported on June 30, 2014, Nokia Group’s long term debt stood at €2.4 billion, a decrease of 26% from January, 2014.

Financial results getting better

Nokia after suffering consecutive fall in revenues, is recovering as it divests itself of handset segment and focusses on networking business. The company’s increasing margins along with growing revenues is a step in positive direction for the company. Furthermore, reduction in long term debt is clearly an improvement to its capital structure. Additionally, the recommencement of dividends is a positive sign for the shareholders.

ILLUSRTATION OF WEAK PERFORMANCE OF NOKIA IN LAST 5 YEARS WHEN COMPARED TO NASDAQ AND S&P500

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