Nokia Oyj won’t pay investors a dividend for the first time in at least 143 years as mounting losses cause the struggling Finnish mobile-phone maker to retain cash for its comeback attempt.
The company announced the decision as it reported its first net income in seven quarters. Even the World Wars and the breakup of the Soviet Union, a major buyer of Nokia’s networking gear, didn’t stop the company returning cash to investors.
Nokia is trying to claw back business after sales plunged and combined losses had reached almost 5 billion euros ($6.7 billion) since early 2011. Chief Executive Officer Stephen Elop has cut more than 20,000 jobs and is conserving cash to challenge Apple Inc. and Google Inc. with devices running Microsoft Corp. software.
The dividend omission will “ensure strategic flexibility,” Nokia said today in a statement.
Nokia was projected to omit its payout, according to a Bloomberg dividend forecast. To maintain the dividend at its previous level, Nokia would have had to pay about 750 million euros from its cash reserves. The company’s net cash rose to 4.4 billion euros at the end of the fourth quarter.
Nokia shares rose 3.9 percent to 3.62 euros at 1:08 p.m. in Helsinki. They have lost more than half their value since February 2011, when Nokia said its phones would run Microsoft’s Windows. Still, the stock has recovered from July’s low of 1.37 euros as investors reassessed Nokia’s chances of recovery.
As part of his reorganization, Elop has closed production and research facilities and sold patents and other assets. He has introduced smartphones including the Windows-based Lumia 920, which is carried by AT&T Inc. in the U.S.
Nokia said this month that Lumia unit sales rose to 4.4 million in the fourth quarter. Apple said yesterday it sold 47.8 million iPhones during the period. Android shipments rose to 136 million units in the third quarter, according to researcher IDC.
Nokia’s fourth-quarter net income was 202 million euros, or 5 cents a share, compared with a loss of 1.07 billion euros, or 29 cents, a year earlier. Analysts projected a loss of 7 cents. Net sales declined 20 percent to 8.04 billion euros, compared with the 8.1 billion euros analysts estimated.
Nokia started as a wood-pulp and paper company in 1865 before expanding into rubber, electronics and eventually telecommunications. The company has paid a dividend every year since at least 1871, according to electronic records, Nokia’s centennial jubilee tome published in 1965 and printed annual reports reviewed by Bloomberg at the National Library of Finland. No data for 1865 to 1870 was available.
Once the world’s largest smartphone maker, Nokia’s market share topped 50 percent before Apple’s iPhone and Google’s Android operating system were introduced about five years ago. Nokia has lost more than 80 percent of its market value since then and fallen outside the top-five smartphone makers.
Elop, who joined from Microsoft in 2010, started betting on his former employer’s operating system after Nokia’s homegrown Symbian software fell out of favor among consumers.
Investment in the new strategy has yet to reverse falling sales, and investors have worried over the manufacturer’s cash position as it struggles to win back consumers.
Nokia’s debt is ranked BB- at Standard & Poor’s and Fitch Ratings and an equivalent Ba3 by Moody’s Investors Service, three levels below investment grade. All three raters have a negative outlook on Nokia. S&P said in August it may downgrade Nokia again if the company failed to stabilize margins and “significantly cut its cash losses.”
The company’s devices unit had an operating margin of 1.3 percent in the fourth quarter excluding some items, the first profit in a year and a sign the company is making progress with its cost reductions. In the current quarter, the handset unit will probably have an operating loss equivalent to 2 percent of sales, Nokia said this month. That prediction has an error margin of plus or minus 4 percentage points.
Nokia Siemens Networks, the phone-equipment venture of Nokia and Siemens AG, topped Nokia’s earlier estimates with fourth-quarter operating profit of 14.4 percent of sales, excluding some items. In October, Nokia Siemens posted its first quarterly sales increase and profit since 2011, helped by demand for long-term evolution, or LTE, networks that allow faster data speeds.
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