Nokia Corporation (ADR)(NYSE:NOK) (BIT: NOK1V) (HEL: NOK1V) Chief Executive Stephen Elop, who is expected by many to lead Microsoft Corporation (NASDAQ:MSFT), has many unfinished tasks in his current organization, which is undergoing severe times, says a report from The Wall Street Journal by Sven Grundberg.
Eventful year for Nokia, so far
For the Finnish firm, it has been a significant year, with Nokia Corporation (NYSE:NOK) (BIT: NOK1V) (HEL: NOK1V) acquiring the remaining stake in Nokia Siemens wireless network (NSN) venture for €1.7 billion ($2.25 billion). Additionally, the Finnish handset maker launched a host of new devices. The handset maker has also been in talks with Microsoft over a potential purchase.
However, the price of Nokia shares has been neutral because of decline of its core handset business, which has not shown any signs of recovery, despite several efforts.
Elop’s efforts not bearing expected results
“Nokia clearly has a revenue problem and it remains too big for its breeches,” Hakan Wranne, an analyst at Swedbank AB in Stockholm, said Monday. He added that Nokia still needs to cut on its cost. Analyst downgraded the stock from Hold to Reduce.
Since 2010, after Elop joined the company, tens of thousands of jobs have been slashed, of which half of the jobs were from the phone business. Further, Elop cut down on manufacturing, research and development plans and sold off assets including patents and the company headquarters. Nokia Corporation (NYSE:NOK) (BIT: NOK1V) (HEL: NOK1V) switched to Microsoft Windows software for its Smartphones in 2011. Presently, total employees in Nokia are 92,000 compared to 132,000 in 2010.
However, despite all the efforts, the company still remains in a struggling phase, with no respite.
In the first two quarters of 2013, Nokia Corporation (NYSE:NOK) (BIT: NOK1V) (HEL: NOK1V) posted a loss of €500 million compared to €1.8 billion loss posted a year earlier. But the improvement was mainly due to the impressive performance from the wireless network business.
Elop assured that operating expenditure of phone business will be around €3 billion, by the year end, slightly more than half of what it was in 2010. But the sales have been falling more sharply than costs.
No respite in sight
Nokia Corporation (NYSE:NOK) (BIT: NOK1V) (HEL: NOK1V) credit rating was lowered to ‘junk territory’ by Moody’s Investors Service, last month. The rating agency said that cash flow in Nokia will not reach breakeven before next year.
According to Moody’s, even if Nokia posts double digit growth in volume for its Windows phone then too it would take two years’ to return to a sustained profit.
“In the second quarter 2013, [Nokia’s] smartphone business was still losing €14 for every €100 of sales,” the ratings service said.
Pierre Ferragu, an analyst at Sanford C. Bernstein & Co., said that Nokia Lumia smartphones are not gaining a considerable market share and is expecting that the company is going to post a “disastrous third quarter”. Ferragu expects that Nokia Corporation (NYSE:NOK) (BIT: NOK1V) (HEL: NOK1V) will consider further restructuring, and the announcement for same, may come by the end of the year.