Nokia Oyj will skip a dividend for the first time in at least 143 years as the struggling Finnish mobile-phone maker retains cash for its comeback attempt.
The company announced the decision as it reported a seventh straight drop in quarterly revenue and U.S. phone sales trailing estimates, sending its stock lower. Even the World Wars and the breakup of the Soviet Union, a major buyer of Nokia’s networking gear, didn’t stop the former maker of rubber boots and toilet paper from returning cash to investors.
Chief Executive Officer Stephen Elop has cut more than 20,000 jobs and is conserving cash to challenge Apple Inc. and Google Inc. with devices running Microsoft Corp. software. Cost cuts helped Nokia post its first profit since early 2011 after racking up losses of almost 5 billion euros ($6.7 billion).
The dividend omission “is a very important step because it shows management is conscious of the work that is ahead,” said Eric Beaudet, an analyst at Natixis Securities in Paris. “It’s clearly a strong signal to the market that says ’Don’t worry about our balance sheet, we’ll do what it takes.’”
Nokia was projected to forgo a payout, according to a Bloomberg dividend forecast. To maintain the dividend at its previous level, Nokia would have had to pay about 750 million euros from its reserves. The company’s net cash rose to 4.4 billion euros at the end of the fourth quarter, and the payout omission will “ensure strategic flexibility,” Nokia said.
Nokia shares fell 5.5 percent to 3.30 euros at the close in Helsinki. They have lost more than half their value since February 2011, when Nokia said its phones would run Microsoft’s Windows. Still, the stock has recovered from July’s low of 1.37 euros as investors reassessed Nokia’s chances of recovery.
As part of his reorganization, Elop has closed production and research facilities and sold patents and other assets. He has introduced smartphones including the Windows-based Lumia 920, which is carried by AT&T Inc. in the U.S.
Lumia unit sales rose to 4.4 million in the fourth quarter and total sales fell to 86.3 million phones, including 700,000 units in North America. Sales in China slid 69 percent to 4.6 million units. Apple said yesterday it sold 47.8 million iPhones globally during the period. Android shipments rose to 136 million units in the third quarter, according to researcher IDC.
“U.S. volumes are very weak,” said Mikko Ervasti, an Evli Bank analyst in Helsinki, who predicted North America sales of 1.2 million Lumias. “U.S. ramp-up is not going as expected.”
Nokia’s fourth-quarter net income was 202 million euros, or 5 cents a share, compared with a loss of 1.07 billion euros, or 29 cents, a year earlier. Analysts projected a loss of 7 cents. Net sales declined 20 percent to 8.04 billion euros, compared with the 8.1 billion euros analysts estimated.