As we all know Nokia last week revealed its corporate earnings for the fourth quarter - respective for the whole year of 2012. After having reported losses for seven consecutive quarters the Finnish mobile kings were once again able to show green in the bottom.
Despite this, the stock has fallen dramatically since the earnings call last week. After having risen with nearly 160% percent since it hit the bottom in July 2012, the stock has just in the last couple of days fallen with more than 10%. The explanations to this decline are many, as it usually tends to be. One explanation relates to the decision of not handing out any dividend this year. Although this was rather remarkable to investors - as it was the first time in its history the company had decided to not give out any dividends - it should however not come as a shock for most people knowing the company and the industry it acts in.
The telecom industry is as we all know a highly competitive industry. Cash is therefore in this particular industry a highly competitive asset, and maybe the most important one. Cash usually enables companies to take on more risk in its operations but also to become more flexible, both in terms of marketing and innovation, something that is more important in an ever-changing telecom industry.
Looking at the report from last quarter we see that Nokia Corporation strengthened its cash position by approximately 800 million EURO (sequentially). We also see that the group ended 2012 with a strong balance sheet and solid cash position. The gross cash was 9.9 billion EUR and the net cash was 4.4 billion EUR.
This news has somehow been disregarded by the stock market. The company strengthened its cash position this quarter, however the stock yet declined. Put it in relation to the prior concerns relating to its liquid assets and cash burning rate and I would suggest that the market have punished the Nokia stock.
Fourth quarter 2012 highlights:
Nokia Group non-IFRS EPS in Q4 2012 was EUR 0.06; reported EPS was EUR 0.05.
- Nokia Group achieves underlying operating profitability, with Q4 non-IFRS operating margin of 7.9%.
- Nokia Group strengthened its net cash position by approximately EUR 800 million sequentially, of which
approximately EUR 650 million was generated by Nokia Siemens Networks.
- Devices & Services Q4 non-IFRS operating margin improved quarter-on-quarter to 1.3%, due to an increase in
gross margin as well as a decrease in operating expenses.
- Nokia Siemens Networks non-IFRS operating margin improved quarter-on-quarter and year-on-year to a
14.4% in Q4, the highest level of underlying operating profitability since its formation in April 2007, primarily
due to an increase in gross margin.
Full year 2012 highlights:
Nokia Group full year 2012 non-IFRS EPS was EUR -0.17; reported EPS was EUR -0.84.
- Nokia Group achieves underlying operating profitability, with full year 2012 non-IFRS operating margin of
- Nokia Group ends 2012 with a strong balance sheet and solid cash position. Gross cash was EUR 9.9 billion and
net cash was EUR 4.4 billion, after incurring cash outflows related to restructuring of approximately EUR 1.5
billion and dividend payment of approximately EUR 750 million.
- To ensure strategic flexibility, the Nokia Board of Directors will propose that no dividend payment will be made
for 2012 (EUR 0.20 per share for 2011). Nokia's Q4 financial performance combined with this dividend proposal
further solidifies the company's strong liquidity position.
Disclosure: I am long NOK.