Nokia expected to suspend dividend; all eyes on Lumia growth - Hindustan Times
close_game
close_game

Nokia expected to suspend dividend; all eyes on Lumia growth

Reuters | By, Helsinki
Jan 24, 2013 12:22 PM IST

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.

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.

HT Image
HT Image


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.

Hindustan Times - your fastest source for breaking news! Read now.

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.

Investors have said that without sustained growth in Lumia sales this year, Elop may need to change strategy or leave.

Many see the new Lumia 820 and 920, which use the latest Windows Phone 8 software, as make-or-break models for Nokia.

The products come in vivid colors and are equipped with high-resolution cameras. They earned mostly positive reviews from gadget critics but sales have been hit by supply problems, with industry sources citing a shortage of chips.

While recent sales of less sophisticated "feature phones" such as the Asha model have been stronger than many expected, analysts say the company's long-term survival depends on the success of higher-margin smartphones.

An increasing number of global customers - including those in emerging markets - are demanding Internet access, and use of social networking sites like Facebook, from their mobile phones.

Investors will also be listening for updates to Nokia's plans for Nokia Siemens Networks, its joint venture with Siemens.

Signs of a turnaround at NSN have raised hopes it could go public, meaning more cash for Nokia to keep investing in its smartphones.

With the shares up nearly 60 percent over the past three months, however, most analysts were cautious. According to Thomson Reuters StarMine data, 22 analysts had a "sell" or "strong sell" recommendation on the shares while 13 rated them a "buy" or "strong buy".

Nokia has paid an annual dividend every year since 1989. Its payment last year was 20 euro cents.

Unlock a world of Benefits with HT! From insightful newsletters to real-time news alerts and a personalized news feed – it's all here, just a click away!- Login Now!
Stay informed on Business News along with Gold Rates Today, India News and other related updates on Hindustan Times Website and APPs
SHARE THIS ARTICLE ON
Share this article
SHARE
Story Saved
Live Score
OPEN APP
Saved Articles
Following
My Reads
Sign out
New Delhi 0C
Thursday, March 28, 2024
Start 14 Days Free Trial Subscribe Now
Follow Us On