Nokia Reports Profit but Fails to Soothe Investors

BERLIN — The Finnish phone maker Nokia on Thursday reported its first quarterly profit in the almost two years since entering its smartphone alliance with Microsoft, but the company’s shares fell as doubts persisted about the company’s ability to accomplish a turnaround.

Enlarge This Image

Robert Galbraith/Reuters

A Nokia Lumia 920 running Windows Phone 8.

The company, based in Espoo, Finland, said it had a profit of €202 million, or $269 million, in the three months through December, after a loss of €1.1 billion a year earlier. Sales fell 20 percent, to €8 billion from €10 billion, as it phased out an older line of smartphones that used the Symbian operating system.

The company’s shares fell 5.5 percent in trading in Helsinki, closing at €3.30, as Nokia announced that it would not pay a dividend for 2012, which would save the company about €750 million. It was the first time Nokia had not paid a dividend in recent memory, according to the company.

Mats Nystrom, an analyst at SEB Enskilda Bank in Stockholm, said that Nokia had raised investor hopes this month when it said it would report a quarterly profit, but that the company had not met those expectations with results that showed less-than-expected growth in the average selling price of the Lumia smartphone line and falling cellphone prices.

“I still think it is far from a certainty that this turnaround will be a success,” Mr. Nystrom said.

During a conference call with journalists, the Nokia chief executive, Stephen Elop, challenged that notion, saying the company had successfully eliminated investor concerns about its future. Nokia’s net cash on hand at the end of December, bolstered by the decision to forgo a dividend payment, rose to €4.4 billion from €3.6 billion in September.

“For investors, it was a solid quarter in which we removed concerns about our cash situation,” said Mr. Elop, a former senior executive at Microsoft. Over the past year, he has closed factories across Europe and eliminated 16,500 workers from Nokia’s phone business.

The quarterly net profit was the first since Nokia announced its alliance with Microsoft in February 2011, which set off a turbulent transition that led to about €5 billion in combined losses, the laying off of a third of the company’s work force and a steep decline in its market share in smartphones, the industry’s defining segment.

While sales of Nokia’s new Lumia line, which uses the Microsoft Windows Phone operating system, are accelerating, to 4.4 million units in the fourth quarter from 2.9 million in the third, the company remains a distant challenger to the industry leaders, Apple and Google, whose Android operating system is now running nearly two-thirds of all new smartphones sold around the world.

Apple sold more than 10 times the number of iPhones during the fourth quarter, 47.8 million, and sales of Android smartphones, according to International Data Corp., reached 136 million in the third quarter. But as the largest maker of smartphones running Microsoft’s new Windows Phone 8, Nokia can build on its gains.

“This is really the time now for Nokia to put up results,” said Francisco Jeronimo, an analyst for International Data Corp. in London. “They are almost exclusively out there with Windows 8, and Microsoft is strongly promoting the operating system. There can be no more excuses now.”

In North America, Nokia increased its sales of cellphones by 40 percent in the fourth quarter to 700,000 units, up from 500,000 in the third quarter. Mr. Jeronimo said those results were weak considering the sizable marketing investment in the United States and Canada by Nokia and Microsoft on Windows 8.

Nokia’s share price has fallen by more than half during its software alliance with Microsoft. The shares have risen about 12 percent this year.

In the fourth quarter, Nokia’s profit was fueled by continued cost-cutting and the introduction of the Lumia 820 and 920 smartphones running Windows Phone 8.

The new handsets helped Nokia raise the average selling price of Lumia phones in the quarter to €186, up 33 percent from €140 in the quarter a year earlier. But the average price of Nokia’s basic cellphones, which still make up almost two-thirds of its total phone sales, fell 3 percent, to €31 from €32.