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Nokia hit by weak handset sales

Reuters/ AFR | July 19, 2013
Weak quarterly sales of Nokia smartphones raised the heat on CEO Stephen Elop, whose decision to adopt Microsoft's untested Windows Phone software has yet to deliver the recovery in the company's fortunes he was hired to achieve.

Analysts said customers appeared to be switching to low-priced smartphones more quickly than expected and switching to rival handsets running Android.

Nokia said it would restructure its mobile phone business and could cut up to 440 jobs globally, though some employees could move to newly created positions.

Nokia has been cutting costs and selling off assets to buy time for a turnaround plan, which Elop said would take two years but is now into its third.

Its net cash reserves fell to 4.1 billion euros ($US5.4 billion) from 4.5 billion euros in the previous quarter, in line with expectations and towards the top end of the company's own range of forecasts.

The bright spot in the quarterly report was the improved profitability at Nokia Siemens Networks, a formerly troubled joint venture with Siemens. Nokia agreed earlier this month to buy Siemens's stake.

NSN's operating margin rose to 11.8 per cent from 7 per cent in the first quarter, which put an even better complexion on the 1.7 billion euro deal Nokia had struck to buy the rest of it.

"It seems that the price they paid for the acquisition was very cheap," said Juha Varis, Danske Capital's senior portfolio manager whose fund owns Nokia shares.

Elop gave little indication of what Nokia planned to do with NSN. Analysts expect Nokia eventually to sell it or float it, although some believe it will provide the company with some stability while its devices business struggles.

"The good profitability at NSN takes away some of the 'rush factor'. There is no need for them to make any kind of panicky move," said Nordea analyst Sami Sarkamies.

Nokia shares were down 2.9 pe rcent at 3.00 euros in Helsinki at 1500 GMT. They had risen more than 18 per cent prior to Thursday's announcement, boosted both by the NSN deal and a media report that said it had held talks with Microsoft, albeit abortive.


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