In an effort to save cash as sales continues to decline, Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is expected to get rid of its annual dividend.
This will be a first for the company in more than two decades, according to a recent Reuters poll of 14 analysts. 11 of them believe Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) will not pay any dividend for 2012; this compares to the previous year’s 20 euro cents payment.
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The company has paid an annual dividend since 1989 and this latest poll comes as Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is gearing to announce its fourth-quarter earnings report, before the opening bell on Thursday, January 24.
Earlier in the month, the company reported it had seen underlying profitability for the quarter, increasing hopes that the worst is behind them. Operating margin in its mobile phone business unit has been estimated to break even to 2 percent for the quarter.
The previous forecast had the margin around negative 6 percent.
Market watchers will also keep an eye on the company’s cash holdings. Analysts have estimated Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) will end the quarter with 3.4 billion euros ($4.5 billion in cash, down 39 percent from the previous year.
Other factors include a likely improvement in the company’s Device and Service segment. This comes from a positive showing by its Lumia and low-end Asha smartphones.
In the company’s preliminary report, it said 4.4 million Lumia devices had been sold vs. 2.9 million units in the third quarter. This represents an almost 52% sequential growth. Also, for the fourth quarter, Nokia sold 9.3 million units of Asha handsets, exceeding the previous quarter’s 6.5 million handsets. This is 43% in sequential growth.
Nokia’s Windows-based phones is turning out to be a positive decision, with its big screen Lumia 920 drawing additional customers. This is especially gaining appeal in emerging markets and has been attributed to Asha’s strong results.
But Nokia’s launch of the new Lumia models and the price cut on former models was only one of many factors in the company’s fourth quarter numbers. According to MSN.com, the company also cut costs in the fourth quarter and reported a robust performance from its Nokia Siemens networks that came in better than expected.
Factor in the royalties from Nokia-owned patents, which contributes of more than $65 million to its corporate earnings, and a good quarter could be expected.
In the last week, Nokia had changes to its stock rating.
Societe Generale analysts updgraded the stock from a “Sell” rating to a “Buy” rating, while Canaccord Genuity analysts went from a “Buy” rating to a “Hold” with a $4.00 price target, up from $3.00.
But BMO Capital Markets analysts reaffirmed its “Underperform” rating with a $3.00 price target on the stock, up from $2.00. They wrote the following report:
“NOK pre-announced December quarter results that were better than our and consensus estimates. Most of the upside in the quarter came from NSN and better device margins. Lumia units were 4.4 million, roughly in line with consensus. ASPs were better, implying a decent mix. Feature phones were a little below our estimate. NSN posted an operating margin of about 14%. Guidance for Q1 is better as well…Nokia exhibited much better cost control in the quarter. We are also impressed that NSN meaningfully beat again, and is posting the highest margin since early 2005. That said, we think cost cutting can only get Nokia so far. We believe in line Lumia units are disappointing.”
MKM Partners has a “Sell” rating on the stock and analysts raised their price target $2.00 to $2.50.
Barclays Capital downgraded the stock from an “Equal Weight” rating to “Underweight” with a $3.00 price target on the stock.
They wrote the following:
“We consider Lumia volumes as the principle driver of Nokia’s recovery, however Nokia’s positive pre-announcement last week was driven by opex cuts and strength at Nokia Siemens. We consider both to be more temporary than permanent, and do not see a sufficient inflection in Lumia units to merit recent share appreciation.”
Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is currently trading at $4.53, up 2.37%.