Nokia's N. American handset sales jump to 700,000 in Q4, firm posts profit

Nokia (NYSE:NOK) reported that its North American handset shipments--essentially all Lumia Windows Phones--rose in the fourth quarter to 700,000. That is a marked improvement from the third quarter when it sold 300,000 devices in the U.S. market.

Of course, the figure is still well below what other vendors are selling in the United States. Thus, Nokia still has a long way to go to regain its lost luster.

In a tacit acknowledgement of its situation, Nokia said it will axe its annual dividend for 2012 in order to conserve cash. Nokia's net cash position has dwindle during the past two years as it has struggled with its turnaround using Microsoft's (NASDAQ:MSFT) Windows Phone software as its primary smartphone platform. The company reported that it had net cash on hand of $5.8 billion at the end of 2012, up from $4.75 billion at the end of September. While the $5.8 billion figure is down 22 percent from the end of 2011, Nokia's position improved due to cost cuts and a brighter financial picture at Nokia Siemens Networks.

In terms of its overall financials, Nokia reported a net profit of $269 million, a sharp reversal from a loss of $1.42 billion a year ago. Total sales for Nokia in the quarter were $10.71 billion, down 20 percent year-over-year from $13.33 billion and slightly below analysts' expectations, according to the Wall Street Journal.

"We remain focused on moving through our transition, which includes continuing to improve our product competitiveness, accelerate the way we operate and manage our costs effectively," Nokia CEO Stephen Elop said. "All of these efforts are aimed at improving our financial performance and delivering more value to our shareholders."

Nokia had forecasted earlier this month that its key devices and services unit would achieve underlying profitability in the fourth quarter, and it did indeed, reaching a non-IFRS operating margin of 1.3 percent, a strong improvement from -7.4 percent in the third quarter. Still, sales in the unit were down 36 percent year-over-year to $5.13 billion.

Nokia shipped 86.3 million total handsets--feature phones and smartphones--in the quarter, down 24 percent from 113.5 million in the fourth quarter of 2011. The volumes included 4.4 million Lumia smartphones, 9.3 million Asha touchscreen phones aimed at young consumers in emerging markets, and 2.2 million Symbian phones. The dynamic that affected Nokia for most of 2012 continued in the fourth quarter: Lumia sales have not yet compensated for declining Symbian sales.

The handset maker said that during the quarter, smartphone volumes were affected by supply constraints as it ramped up its production capacity, particularly related to the high-end Lumia 920. The company said the issue continues into the current quarter. Nokia said it expects Symbian devices to account for a significantly smaller portion of its overall smartphone volumes in the first quarter and future quarters.

Nokia said it remains focused on returning its devices and services unit to profitability. A key part of that is cutting costs, spearheaded by the 10,000 job cuts Nokia announced in June. At the end of the fourth quarter, Nokia said its devices and services unit and common corporate units had 33,200 employees, down 16,500 employees compared with the fourth quarter of 2011, and down 5,000 jobs compared with the third quarter of 2012.

Interestingly, Nokia noted that it got $250 million in "platform support payments" from Microsoft in the fourth quarter, as it has in recent quarters. Nokia also pays Microsoft quarterly royalty payments, and the companies expect over the life of their multi-year agreement to send billions of dollars back and forth between them. Up to now, the amount of money Nokia has gotten from Microsoft has exceeded the amount of royalty payments Nokia has paid Microsoft. However, as AllThingsD noted, Nokia said that its financial commitment is now higher than what it can expect to get from Microsoft. Nokia CFO Timo Ihamuotila said on the company's earnings conference call though that Nokia's payments will not be "material."

"Thus for the remainder of the life of the agreement the total amount of the minimum software royalty commitment payments are expected to exceed the total amount of the platform support payments," Nokia said in a release. "In accordance with the terms of the agreement, the platform support payments and annual minimum software royalty commitment payments continue for a corresponding period of time."

For more:
- see this release
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Reuters article
- see this AllThingsD article

Special Report: Wireless in the fourth quarter of 2012

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