Nokia recoups losses of early 2004 in fourth quarter

Mobile phone company announces buyback of own shares

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Finnish mobile telephone giant Nokia showed its resilience with a spurt of growth at the end of last year. The company released its fourth quarter results on Thursday, indicating that profits in October through December exceeded all expectations, turning what began as a lacklustre year into a fairly good one.
      Markets reacted to the good news with a sharp rise in Nokia's share price. With its bloated cash reserves, the company now plans to spend billions of euros buying back its own shares.
     
The net result for the whole year, EUR 3.1 billion, was 14% weaker than that for 2003. Turnover came down by one percent to 29.3 billion euros, and sales for the year showed a decline for a third consecutive year.
      However, in spite of the difficulties of the early part of 2004, Nokia was still at the top of its series. The company's degree of solvency was very high.
     
CEO Jorma Ollila noted that the cash reserves of EUR 11.3 billion exceed the optimum interest rate, and that Nokia's Board plans to ask the company's general shareholders' meeting for authorisation to buy back up to EUR 5 billion worth of its own shares.
      The policy of buying back its own shares began two years ago, when Nokia spent EUR 1.4 billion for the purpose. Last year the company bought EUR 2.6 billion of its own stock. Nonetheless, the cash reserves have continued to grow at roughly EUR one billion a quarter.
      Buybacks of shares allow a company to channel profits to shareholders. The company nullifies the shares that it has bought, proportionally raising the value of the remaining stock. The practice is popular especially in North America. Finnish companies typically channel profits to shareholders in the form of dividends.
      Nokia said that it was handing out dividends of EUR 1.5 billion, which amounts to EUR 0.33 a share.
     
In the last quarter of the year Nokia's turnover grew by three percent to EUR 9 billion. Profit was EUR 1.4 billion - a decline of about 20% from a year earlier.
      Nokia remains clearly the most profitable manufacturer of mobile phone handsets, and its networks business has also been successful.
      In handset sales Nokia managed to recoup some of the losses of the early part of the year. The company said that its market share at the end of the year had risen by one percentage point from the previous quarter to 34%. A year earlier it had been 38%.
      In October - December Nokia sold 66 million handsets, which is a new record for a single quarter.
      With its determined measures, which included sharp price cuts, Nokia added to the miseries of its German rival Siemens, whose mobile phone business sustained losses of EUR 143 million in the fourth quarter of 2004. Samsung, the recent rising star of the business, also felt the strength of Nokia. While Samsung's profitability had exceeded that of Nokia at one point, Nokia regained the number one spot in profitability at the end of the year.
     
Prospects announced for this year were reasonably positive. Nokia expects sales to grow by nearly ten percent from a year earlier.
      "We are again on a path of growth", said Jorma Ollila at Thursday's press conference at the company's head office in Espoo.


Previously in HS International Edition:
  Breaking News: Nokia result for 2004 exceeds forecasts (27.1.2005)
  Nokia even more important for Finnish economy than previously thought (18.10.2005)
  Nokia publishes 3Q result - announces major marketing effort (15.10.2004)
  Nokia offers clamshell models and flexibility in attempt to win back handset market share (15.6.2004)

Links:
  Nokia press release
  Helsinki Exchanges

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