DHAKA: Nokia reported a double-digit drop in sales and profits from its continuing activities in the fourth quarter, while its handset business to be sold to Microsoft also remained in the red.

The continuing operations, which include the network equipment business Nokia Solutions and Networks, navigation service Here and IP licensing through the Advanced Technologies unit, recorded revenues of EUR 3.476 billion, down 21 percent from a year earlier. Adjusted operating profit fell 39 percent to EUR 408 million, and EPS declined 17 percent to EUR 0.05. All three divisions reported lower sales and operating profit.

At the Devices & Services division, reported as discontinued activities, sales fell 29 percent year-on-year and were 5 percent lower than in Q3, at EUR 2.633 billion. Nokia said it suffered from tough competition in both feature phones and smartphones, with ASPs lower for both categories of device. The company did not provide further details on unit sales or prices.

The division`s adjusted operating margin worsened to negative 7.3 percent, from a negative 1.3 percent a year ago and 4.7 percent in Q3. The operating loss of EUR 197 million included EUR 22 million in costs associated with the sale of the handset activities to Microsoft.

NSN`s revenues in the fourth quarter were down 22 percent year-on-year to EUR 3.105 billion, hurt by divestments of non-core activities and an exit of some unprofitable contracts and countries. Greater China was the only region to show growth, up 2 percent to EUR 424 million. Excluding the change in business scope, NSN said sales fell 15 percent, mainly due to a slowdown in GSM and core network deployments and negative currency effects. Total revenues were split roughly equally between services and mobile broadband equipment, but services showed the bigger annual decline, with revenues down 22 percent to EUR 1.540 billion.

NSN met its target for EUR 1.5 billion in annual cost reductions by the end of 2013, helping its gross margin improve to 37.6 percent in Q4 from 36.0 a year earlier. The total costs of the restructuring came in EUR 150 million higher than previously projected, at EUR 1.95 billion.

Nokia highlighted the sequential improvement in NSN`s results and forecast an improvement in group profitability once the Microsoft transaction closes, expected later this quarter. The first quarter at NSN is expected to be seasonally weak, with an adjusted operating margin around 5 percent plus or minus 4 points, compared to 11.2 percent in Q4.

NSN targets an improvement in the margin over the full year 2014. The annual margin should reach the high end of the company`s long-term target of 5-10 percent, compared to a result of 3.7 percent in 2013. This will be helped by a renewed sales drive in the second half of the year and continued restructuring.

Advanced Technologies should also get a boost from the licensing deal with Microsoft and a new five-year licensing agreement announced with Samsung. Its annual run rate in sales is expected to improve to around EUR 600 million from 500 million previously. Here meanwhile is expected to continue to see pressure on its operating margin, as it invests in longer term growth opportunities. The division had an operating loss of EUR 154 million last year, on sales down 17 percent to EUR 914 million.

Nokia had a continued net outflow of cash in Q4, due to the costs of the handset business and EUR 150 million in restructuring costs at NSN. The net cash position of the group dropped 4 percent compared to Q4 and 47 percent year-on-year to EUR 2.31 billion.

Source: telecompaper

BDST: 1742 HRS, JAN 24, 2014