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Nokia is making profits again, and will stop making phones nobody likes

Nokia CEO Stephen Elop
AP Photo / Ng Han Guan
Despite Nokia CEO Stephen Elop’s apparent love of China, Nokia’s sales there shrank 79% in 2012.
By Jacob Albert
EuropePublished Last updated This article is more than 2 years old.

Nokia returned to profitability, but abandoned paying a dividend in order to conserve cash for investments, and posted major sales declines in some key markets.

The Finnish telephone maker reported a fourth-quarter profit of $585 million, after $754 million in losses the previous quarter and a hefty $1.2 billion in losses during the same quarter, one year ago. Nokia’s losses totaled $3.06 billion in 2012.

Nokia’s sales declined 20% last quarter (less than anticipated.) The company said it would hold out on paying dividends for the first time in its 143-year history, to conserve cash and focus on returning to profitability. Nokia CEO Stephen Elop is already fighting on all fronts: he has cut 20,000 jobs and sold off some of Nokia’s patents

Some of Nokia’s worst losses occurred in its device division: the company sold 20% fewer phones in 2012 than it did in 2011. One reason is that customers shunned Nokia’s Symbian platform—once the world’s most popular smartphone operating system, before the arrival of Apple’s iOS and Google’s Android. But Nokia is intent on turning its smartphone division around, and confirmed that it would no longer make Symbian phones, in favor of Microsoft software. The 808 Pure View, which the company released in the middle of last year, will be the last ever Nokia Symbian.

Nokia suggested the Symbian platform’s lack of popularity was responsible for the company’s misfortunes in China, where sales last year declined 69%: “On a year-on-year basis, the decrease in Greater China net sales was primarily due to our Smart Devices business unit, most notably lower net sales 
of our Symbian devices,” stated the company’s release.

Nokia’s Windows-based smartphones, on the other hand, have become increasingly popular. The company sold 4.4 million Lumias in the fourth quarter, up from 2.9 million in the third (for comparison, Apple sold 47.8 million iPhones in the same period). Part of the Lumia’s success comes from the phone’s appeal in Europe and America—but it is in China and India that the company is counting for the biggest sales ultimately.

Though Nokia’s Asha models, less expensive feature phones with basic smartphone capabilities, are selling like hotcakes in India, they are not taking off in China’s more developed market. Even the higher-end Lumias aren’t helping Nokia boost its meager 2% smartphone market share quite yet in China, where Nokia’s sales shrank 79% in 2012.

Nokia relied heavily on the company’s network division, a joint venture with Siemens, for the bulk of its income. The telecom unit turned a profit of $334 million, the first quarterly sales profit since 2011, driven by growing demand for faster data networks in Japan and Korea, and big 4G deals in America. By the third quarter of 2012, Nokia was the third-largest wireless network provider in the world (with 20% of the market), only two percentage points behind the second biggest, China’s Huawei, which Nokia hopes to surpass by the end of this year.

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