Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s inclination to spend cash faster than any of its competitors is worrying its bondholders and increasing the company’s risk, even when the smartphone maker strengthened its balance sheet by not paying a dividend for the first time in 143 years. According to the advice of Societe Generale SA investors,  Nokia should sell 500 million euros ($673 million) or 6.75 percent bonds, which are due in 2019 and buy five-year credit-default swaps, which will protect the investors if Nokia fails to pay debt.

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“Although recent results show that its turnaround plan is heading in the right direction, we remain cautious with regard to the company’s ability to achieve its longer-term financial objectives, including a return to sustainable profitability and free cash flow generation,” said Robert Jaeger, an analyst at SocGen in London.

The turnaround strategy of Nokia is bringing in some good sign of progress for the company, as the Finnish smartphone maker posted its first profit since early 2011 after the Chief executive Officer Stephen Elop followed the restructuring process by trimming the jobs and pulling down the factories, but the company had straight seventh quarter revenue drop.

In a quest to save approximately 750 million euros, the handset maker decided not to pay the dividend to its common shareholders. This was a major step taken by the Finnish firm after it axed about 20,000 jobs and closed production and research facilities.

These moves are in favor of bondholders, but according to analysts and industry experts, Nokia is spending cash too quickly when compared to its rivals, and its sales also trail too far than its competitors.

Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) slipped to third place after Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930)’s Galaxy and Apple Inc. (NASDAQ:AAPL) iPhone captured the whole of the market. According to the analysis firm, Nokia’ shares in the market came down to 5 percent from 15.8 percent.

“The market share is still a long way from where the leaders are, and a long way from where they were,” said Dave Novosel, a senior analyst at Chicago-based bond research firm Gimme Credit. “We’re still a sell here.”

As per the data from Bloomberg, Nokia is the only cell phone maker with negative free cash flow for 2012. The frontrunner Lumia brand from Nokia was left behind in sales compared to its rivals like Samsung and Apple. Nokia has 3.6 billion euros of bonds to be paid, including 1.25 billion euros coming due next year; Samsung has about $2.5 billion of notes, while Apple has no public debt.

S&P recently downgraded Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) on grounds of lower revenue and profitability estimates for smartphone operations in 2012 and 2013. The rating company warned it may downgrade Nokia again if the Lumia market fails to stabilize margins and “significantly cut its cash losses.”