Nokia shares fall despite reporting quarterly profit

THE Finnish phone-maker Nokia this week reported its first quarterly profit in the two years since entering its smartphone alliance with Microsoft.

But the company's shares fell as doubts persisted about its ability to accomplish a turnaround.

The company, based in Espoo, Finland, said it had a profit of $US270 million ($A258 million) in the three months through December, in contrast to a loss of $US1.5 billion in the period a year earlier. Sales fell 20 per cent, to $US10.7 billion, from $US13.3 billion, as it phased out an older line of smartphones that used the Symbian operating system.

The company's shares fell 5.5 per cent in trading in Helsinki; shares fell 8.2 per cent in New York, to $4.26.

Nokia also announced that it would not pay a dividend for 2012, which would save the company about $US998.7 million. It was the first time Nokia had not paid a dividend in recent memory, according to the company.

Mats Nystrom, an analyst at SEB Enskilda Bank in Stockholm, said that Nokia had raised investor hopes this month when it said it would report a quarterly profit, but that the company had not met those expectations with results that showed less-than-expected growth in the average selling price of the Lumia smartphone line and falling mobile phone prices.

"I still think it is far from a certainty that this turnaround will be a success," Mr Nystrom said.

In a conference call with reporters, the Nokia chief executive, Stephen Elop, challenged that notion, saying the company had successfully eliminated investor concerns about its future. Nokia's net cash on hand at the end of December, bolstered by the decision to forgo a dividend payment, rose to $US5.9 billion, from $US4.8 billion in September.

"For investors, it was a solid quarter in which we removed concerns about our cash situation," said Mr Elop, a former senior executive at Microsoft.

Over the past year, he has closed factories across Europe and eliminated 16,500 workers from Nokia's phone business.

The quarterly net profit was the first since Nokia announced its alliance with Microsoft in February 2011. The transition was turbulent and led to about $US6.7 billion in combined losses, the layoffs of a third of the company's work force and a steep decline in its market share in smartphones, the industry's high-end and defining segment.

While sales of Nokia's new Lumia line, which uses the Microsoft Windows Phone operating system, are accelerating, to 4.4 million units in the fourth quarter from 2.9 million in the third, the company remains a distant challenger to the industry leaders. But as the largest maker of smartphones running Microsoft's new Windows Phone 8, Nokia can build on its gains.

"This is really the time now for Nokia to put up results," said Francisco Jeronimo, an analyst at the International Data Corp.

"They are almost exclusively out there with Windows 8, and Microsoft is strongly promoting the operating system. There can be no more excuses now."

In North America, Nokia increased its sales of mobile phones by 40 per cent in the fourth quarter to 700,000 units, from 500,000 in the third quarter.