Nokia looks to stay connected with change of guard, strategy

Written by New York Times | London | Updated: Apr 30 2014, 21:48pm hrs
The Finnish technology company Nokia announced a new strategy on Tuesday that focuses on its core mobile telecommunications infrastructure business, and it named the head of that division, Rajeev Suri, as its new chief executive.

The plan opens the first period in more than 30 years in which the company, once the global leader in smartphones, will not have a presence in the phone market; it completed the sale of its beleaguered handset business to Microsoft on Friday for $7.5 billion.

Under the new strategy, Nokia said, it will continue to invest in its two other business units, which focus on digital maps and on developing the companys research and intellectual property teams.

As part of the strategic review after the handset sale, Nokia said Tuesday that it would carry out dividend payments, share buybacks and debt reductions totalling more than 5 billion euros, or $6.9 billion.

I feel excited about the challenge, Suri, 46, who will become chief executive on Thursday, said in an interview. The vision for the company is inspiring and the future is bright.

The company said its net income during the first quarter, excluding the handset division, was 108 million euros, compared with a 98-million-euro loss in the same period last year. Nokias revenue fell 15%, to 2.7 billion euros, over the same period, primarily because of reduced sales and asset divestments from the companys telecom infrastructure unit, according to a company statement.

The earnings also showed what confronts Microsoft as it looks to revamp the handset division. Nokia said that the units revenue fell 30%, to 1.9 billion euros, in the first three months of the year. It also reported an operating loss of 326 million euros, compared with 120 million euros in the same period in 2013.

The announcement follows demands from many investors that the company return cash from the handset sale.

The total includes dividends adding up to 1.8 billion euros to shareholders over the next two years. Nokia said it would buy 1.25 billion euros worth of its own shares in the same period and reduce its debt by 2 billion euros by the second quarter of 2016.

These capital structure enhancements support our longer-term target to return to an investment grade credit rating, which would further affirm our long-term competitive strength and support our strategic objectives, Timo Ihamuotila, Nokias chief financial officer, said in a news release.

The focus on its core mobile telecom business, which generates almost 90% of Nokias yearly revenue, comes as many of the worlds largest carriers are investing in fourth-generation high-speed cellphone equipment. Nokias main competitors include Ericsson of Sweden, which also recently sold its handset business, and Huawei of China.

Suri, who will continue to run the main network business, has been praised for turning around the division since taking over in 2009. As part of his restructuring, he cut more than 21,000 jobs worldwide in an effort to increase the divisions profitability.

Analysts have questioned whether Nokias other units, particularly its mapping division, which provides digital maps for the automotive industry and companies like Microsoft and Yahoo, fit with its new strategy.

Yet Suri said the three divisions formed part of his plan to expand Nokias presence into how people use devices like smartphones, tablets and other internet-connected products.

Our vision is the programmable world, he said. We want to be a leader when everyone and anything is connected.