Nokia expected to suspend dividend; all eyes on Lumia growth

Wed Jan 23, 2013 7:02pm EST
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HELSINKI (Reuters) - Finnish mobile phone maker Nokia is expected to propose suspending its annual dividend payment for the first time in over 20 years, as it aims to save cash amid falling sales.

The move, which it is set to announce with fourth-quarter results on Thursday, is likely to make many investors cautious about increasing their bets on a recovery at Nokia, which has fallen behind in the smartphone race against rivals Samsung and Apple.

Nokia earlier this month flagged a return to underlying profitability after massive cost cuts and stronger sales of Lumia smartphones, helping its shares surge over 16 percent over the past 10 trading days.

But it also said quarterly sales of devices and services fell 35 percent to 3.9 billion euros ($5.2 billion), and analysts estimate its net cash position fell to 3.4 billion from 5.6 billion a year earlier.

Analysts have been cautious, saying Nokia's cost cuts may have given it more breathing space but it still had a long way to go before proving it could claw back market share.

"The turnaround in itself is likely not mid- to long-term sustainable unless Nokia smartphones show clear trends of gaining traction - which they did not," said J.P. Morgan analyst Sandeep Deshpande.

Nokia said it sold 4.4 million Lumias in the fourth quarter, but analysts estimate Nokia's market share in the high-margin smartphone business is still around 5 percent.

That means Chief Executive Stephen Elop, hired in 2010 from Microsoft, is still under pressure to show he made the right decision in February 2011 to adopt Microsoft Windows software.

Elop had said the company's transition with the new software would take two years - a period that is almost over.   Continued...

Nokia Lumia smartphones are pictured in a shop in Warsaw, January 11, 2013. REUTERS/Kacper Pempel