 "Nokia announces new strategy")
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 company's research and intellectual property teams.
Some analysts, however, questioned how the 149-year-old company, whose roots dates back to paper manufacturing in the 19th century, would be able to integrate the different divisions into a coherent strategy.
The company remains dependent on its network business, which currently generates almost 90 per cent of Nokia's revenue, while its mapping business faces stiff competition from the likes of Apple and Google.
As part of the strategic review after the handset sale, Nokia also said Tuesday that it would carry out dividend payments, share buybacks and debt reductions totalling more than euro 5 billion, or $6.9 billion.
Despite the uncertainty about the company's long-term plans, investors cheered the dividend and share buyback news. Nokia's shares had risen five per cent in afternoon trading in Helsinki. The company's stock has jumped 86 per cent since the handset deal was first announced in September.
"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."
Nokia said its net income during the first quarter, excluding the handset division, was €108 million, compared with a €98 million loss in the same period last year. Nokia's revenue fell 15 per cent, to €2.7 billion, over the same period, primarily because of reduced sales and asset divestments from the company's 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 unit's revenue fell 30 per cent, to €1.9 billion, in the first three months of the year. It also reported an operating loss of €326 million, compared with €120 million 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 to shareholders over the next two years. Nokia said it would buy €1.25 billion worth of its own shares in the same period and reduce its debt by €2 billion 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, Nokia's CFO, said in a news release.
The focus on its core mobile telecom business comes as many of the world's largest carriers are investing in fourth-generation high-speed cellphone equipment. Nokia's 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.
Born in India, Suri, an engineer, graduated from the same university as Microsoft's new chief executive, Satya Nadella. He joined Nokia almost 20 years ago, and worked in the company's Asian operations before taking the helm of networks business.
Faced with a large work force and small profit margins, Suri cut more than 21,000 jobs worldwide as part of a lengthy restructuring process. Other competitors like Alcatel-Lucent are now undertaking similar efforts to reduce their global work force.
Analysts remained divided over whether Nokia's 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.
While the company's patent and research division holds several lucrative patents, it remains unclear how the unit would use its technical expertise in the future. On Tuesday, Suri suggested that the division may even turn its attention to new consumer products, despite Nokia's failure to react to changes in the smartphone market driven by the introduction of Apple's iPhone in 2007.
He added that the three divisions still formed part of his plan to expand Nokia's presence into how people use devices like smartphones, tablets and other Internet-connected products.
"Though there are no surprises in Nokia's strategy statements, we believe all three of its existing businesses are well positioned to add further value in the years ahead," said Janardan Menon, an analyst at Liberum Capital in London.
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 company's research and intellectual property teams.
Some analysts, however, questioned how the 149-year-old company, whose roots dates back to paper manufacturing in the 19th century, would be able to integrate the different divisions into a coherent strategy.
The company remains dependent on its network business, which currently generates almost 90 per cent of Nokia's revenue, while its mapping business faces stiff competition from the likes of Apple and Google.
As part of the strategic review after the handset sale, Nokia also said Tuesday that it would carry out dividend payments, share buybacks and debt reductions totalling more than euro 5 billion, or $6.9 billion.
Despite the uncertainty about the company's long-term plans, investors cheered the dividend and share buyback news. Nokia's shares had risen five per cent in afternoon trading in Helsinki. The company's stock has jumped 86 per cent since the handset deal was first announced in September.
"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."
Nokia said its net income during the first quarter, excluding the handset division, was €108 million, compared with a €98 million loss in the same period last year. Nokia's revenue fell 15 per cent, to €2.7 billion, over the same period, primarily because of reduced sales and asset divestments from the company's 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 unit's revenue fell 30 per cent, to €1.9 billion, in the first three months of the year. It also reported an operating loss of €326 million, compared with €120 million 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 to shareholders over the next two years. Nokia said it would buy €1.25 billion worth of its own shares in the same period and reduce its debt by €2 billion 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, Nokia's CFO, said in a news release.
The focus on its core mobile telecom business comes as many of the world's largest carriers are investing in fourth-generation high-speed cellphone equipment. Nokia's 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.
Born in India, Suri, an engineer, graduated from the same university as Microsoft's new chief executive, Satya Nadella. He joined Nokia almost 20 years ago, and worked in the company's Asian operations before taking the helm of networks business.
Faced with a large work force and small profit margins, Suri cut more than 21,000 jobs worldwide as part of a lengthy restructuring process. Other competitors like Alcatel-Lucent are now undertaking similar efforts to reduce their global work force.
Analysts remained divided over whether Nokia's 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.
While the company's patent and research division holds several lucrative patents, it remains unclear how the unit would use its technical expertise in the future. On Tuesday, Suri suggested that the division may even turn its attention to new consumer products, despite Nokia's failure to react to changes in the smartphone market driven by the introduction of Apple's iPhone in 2007.
He added that the three divisions still formed part of his plan to expand Nokia's presence into how people use devices like smartphones, tablets and other Internet-connected products.
"Though there are no surprises in Nokia's strategy statements, we believe all three of its existing businesses are well positioned to add further value in the years ahead," said Janardan Menon, an analyst at Liberum Capital in London.
Copyright 2014 The New York Times News Service