Nokia returns to profit in Q4, drops dividend

Nokia returned to a net profit in the fourth quarter, helped by a gradual improvement in sales of its mobile phones and cost reductions. EPS came in at EUR 0.05, versus a loss of EUR 0.29 a year earlier, and adjusted operating profit rose 33 percent year-on-year to EUR 635 million. Sales were still down 20 percent to EUR 8.04 billion, but improved 11 percent compared to the third quarter. 

Its core Devices & Services division showed a similar picture, with revenues down 36 percent year-on-year but 8 percent higher sequentially at EUR 3.85 billion. Adjusted operating profit at the division plunged 82 percent from a year ago to EUR 52 million, and the margin fell to 1.3 percent from 4.9 percent, but this was better than the company's guidance of minus 6 percent, plus or minus four percentage points. 

Unit sales were in line with the company's preliminary report, with a total 86.3 million devices shipped, down 24 percent from a year earlier but up 4 percent on Q3. The average selling price fell 15 percent year-on-year and rose 5 percent sequentially to EUR 45. The quarterly growth was driven by higher sales of the Lumia Windows phones, which helped the ASP on smart devices rise 20 percent from Q3 and 33 percent year-on-year to EUR 186. Nokia held prices on the Lumia phones in the quarter, after discounts earlier in the year, helping the ASP on its flagship range rise to EUR 192 from EUR 160 in Q3. 

Overall, Europe showed the strongest improvement sequentially at Devices & Services, with revenues up 23 percent to EUR 1.21 billion and volumes rising 15 percent to 19.4 million phones. There was also solid growth in the Middle East and Africa and North America, but the Greater China was again down in double-digits, which Nokia said was due to lower Symbian sales. 

For the seasonally weaker first quarter, Nokia forecast a margin at Devices & Services of negative 2 percent, plus or minus four points. The company maintained its target to reduce adjusted operating costs at Devices & Services to EUR 3 billion by the end of this year. Nokia said its Location & Commerce division will move to a negative adjusted operating margin in Q1, due to lower internal sales and to a lesser extent a negative mix shift in external sales. In Q4, the division's margin was 14.4 percent.

Nokia finished the quarter with EUR 9.9 billion in cash. Operating cash flow in Q4 was down 11 percent from a year ago to EUR 563 million, while the company also booked another USD 250 million platform support payment from Microsoft in the quarter. After a net loss of EUR 3.1 billion over the full year 2012, Nokia said it will not pay a dividend, in order to maintain a strong balance sheet.