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Risky Lumia move nudges Nokia back into the black
(Guardian (UK) Via Acquire Media NewsEdge) Nokia's make-or-break Lumia phone has helped Finland's most famous firm return to profit, after it racked up losses of more than euros 4bn (pounds 3.36bn) over the previous 18 months.
The mobile phone maker reported an operating profit of euros 439m, compared with a loss of nearly euros 1bn a year ago, as consumer demand for its smartphones revived and the decision to slash its workforce by 20,000 helped to cut costs. Sales grew 11% on the previous quarter to euros 8bn. But the drive to reduce down costs is not over yet; Nokia yesterday announced that it was axing its dividend payout to shareholders for the first time in more than a century.
The number of smartphones sold rose to 6.6m over Christmas, up from 6.3m the quarter before, with 4.4m of the total coming from the Lumia range, which uses the Windows operating system. The average selling price has rocketed by 33% to euros 186 as the quality of its handsets has improved.
Nokia had needed a return to form. It has burned through so much cash to fund its transition over the last 18 months that analysts had predicted it could run out of cash within two years.
Chief executive Stephen Elop abandoned the company's in-house phone software, Symbian, in favour of Microsoft's Windows Phone in 2011, in order to produce devices capable of matching Apple and Samsung's best products.
It was a move that many considered risky, given Microsoft's negligible presence in mobiles and the massive popularity of Google's Android software.
"We are very encouraged that our team's execution against our business strategy has started to translate into financial results," said Elop.
The company has paid a dividend since electronic records began in 1989, although one Finnish researcher claims that shareholders have received a payout every year since 1871, when Nokia was in the paper mill business.
"The fourth quarter 2012 was the bottom line for Nokia," said Francisco Jeronimo at market research firm IDC. "Significant results need to be delivered this year starting from the first quarter. Nokia has only options: either significantly grow sales or change its strategy, radically."
Nokia's performance was boosted by its network equipment business, Nokia Siemens Networks, which after cost-cutting and a sales boost reached its highest operating margin since its formation in 2007.
Captions:
Chief executive Stephen Elop in front of an image of the new Lumia smartphone at a Nokia event in London in October 2011 Photograph: Paul Hackett/Reuters
(c) 2013 Guardian Newspapers Limited.
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