The much-anticipated results are in, and Nokia Corporation (NYSE:NOK) did just about as expected in its most recent Q4 announcement. Unfortunately for shareholders enjoying Nokia's stellar dividend yield -- currently around 5.5% -- Nokia's board of directors intends to end the payout beginning with Q4 2012, at least for the foreseeable future.
Nokia's decision to suspend its dividend shouldn't be a complete shock for shareholders; the rumor mill has been active leading up to today's earnings. So, why the change of heart? As Nokia CEO Stephen Elop put it, ending the dividend now "further solidifies the company's strong liquidity position."
A few specs The decision to cut its dividend certainly casts further doubts on Nokia's investment prospects. Contrary to what some may have expected from Nokia's Q4, or infer from the cutting of its dividend, Nokia's impressive cash pile grew last quarter. Compared with Q3, Nokia's net cash position jumped 800 million euros, to 4.4 million euros, and that takes into account 1.5 billion euros in costs associated with Nokia's comprehensive cost-cutting initiatives.
Nokia shareholders don't need to be reminded that 2012 started off pretty rough. As Elop's mentioned on more than one occasion, the strategic shift to Microsoft Corporation (NASDAQ:MSFT)'s Windows 8 OS to run its Lumia phones will take time. Elop wasn't shy discussing Nokia's tough start to last year, saying, "While the first half of 2012 was difficult for Nokia Group, in Q4 2012 we strengthened our financial position, improved our underlying operating margin in Devices & Services, introduced the HERE brand to expand our mapping and location experiences, and drove record profitability in Nokia Siemens Networks."
As expected, Nokia Siemens Network, or NSN, drove much of Nokia's bottom-line results, continuing to crank out margins and operating income while the Windows 8 phone lineup gains traction. To give you an indication of how valuable NSN is to Nokia, of the 800 million euro increase in net cash on its balance sheet, 650 million euros came from NSN. The unit's non-IFRS 14.4% operating margin is the highest since NSN's formation in 2007 and couldn't have come at a better time.
What about those phones? When you talk about Nokia nowadays, you have to talk about phones. Sure, NSN is driving its renewed profitability right now, but we all know its Nokia's Lumia and Asha smartphone sales that will make or break 2013, and beyond. Elop shared Nokia's phone sales results a couple of weeks ago, when he announced that 4.4 million Lumia units were sold in Q4, along with 9.3 million middling to low-end Asha smartphones, and a couple of million phones running its Symbian OS. In total, Nokia sold 86.3 million mobile devices last quarter, led by sales in the Asia-Pacific, Middle East and Africa, and European regions.