Nokia CEO Elop Has Big To-Do List - Wall Street Journal

Nokia Corp.'s chief executive has been mentioned as a front-runner in Microsoft Corp.'s search for a new boss, but new concern about the Finnish handset maker is leading to speculation that Stephen Elop has more work to do in his current job. It has been a busy summer, with Nokia purchasing the remaining stake in its NSN wireless-networks venture for €1.7 billion ($2.25 billion), introducing a raft of new devices and talking with Microsoft about a potential purchase. But Nokia's stock price has been stuck in neutral as its core handset business—an important source of revenue—has shown little evidence of turning around. "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. "It seems inevitable that more cuts are needed." Swedbank last week downgraded its rating on Nokia stock to "reduce" from "hold." Mr. Elop has cut tens of thousands of jobs since he joined the company in 2010, including half of the positions in the phone business. He has also pared manufacturing operations, trimmed research-and-development plans and sold assets, including patents and the company's headquarters. In 2011, he decided to begin using Microsoft's Windows operating system for all of its smartphones. The company has about 92,000 employees, compared with 132,000 in 2010. But the company remains mired in a stream of red ink that doesn't have any clear endpoint. Nokia's shares closed Monday at €2.96, up 1.3%. Pierre Ferragu, an analyst at Sanford C. Bernstein & Co, said Nokia's Lumia smartphones are finding only "limited traction" and that he fears that the company is heading for a "disastrous third quarter." He also believes more restructuring is on the horizon, saying, "we wouldn't be surprised to see an announcement in that direction by the end of the year." Nokia recorded a loss of €500 million over the first two quarters, an improvement of the €1.8 billion loss posted for a year earlier. But the company relied on its wireless-networks business for the improved results. "There's a wide range of views from positive to negative" from outsiders, Mr. Elop said during an interview with Sweden's TV4 last week. "I think that, in itself, tells a story of where Nokia is today." But he was unclear on where he sees the company at this point in his tenure. "We've gone through some very difficult times, you're beginning to see the momentum build in a positive direction for the devices business and people are saying, 'Ahh, they might actually be doing it, or maybe they're not, we'll have to see.' In other words, we must continue to prove ourselves." Mr. Elop wasn't available to comment for this article. Mr. Elop has promised that by year-end, the company's operating expenditures for its phone business will be about €3 billion a year, a little more than half what it was in 2010. But phone sales have fallen faster than costs and head count, said Swedbank's Mr. Wranne. Nokia's revenue from phone sales in the second quarter was less than 25% what it was in the first quarter of 2011, when Nokia's tie-up with Microsoft was announced. Moody's Investors Service last month cut Nokia's credit rating further into junk territory. Moody's said cash flow in Nokia's phone business was unlikely to break even before well into next year. Even if Nokia reports double-digit growth in volume for its Windows smartphones, Moody's said, the increase was "from a very low base" and that it could take more than two years for the company 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. In addition to its Lumia phones falling far behind models from rivals such as Apple Inc. and Samsung Electronics Co, a key issue for Nokia has been its inability to maintain momentum in emerging markets. Nokia's sales of basic phones have collapsed as consumers have turned to inexpensive smartphones. Nokia has introduced 18 devices in its Lumia line since the end of 2011. But the company doesn't offer any Windows smartphones for less than $100 apiece, a booming market in Asia, Africa and Latin America that is dominated by phones running Google Inc.'s Android platform. Nokia's least-expensive Windows smartphone, the Lumia 520, retails for around $170. For lower prices, Nokia offers its Asha lineup, devices that come with some smartphone functions but use an outdated operating system that was first introduced in 1999. Nokia's cash position adds to the company's woes. With the devices business still in the red and projected to burn money in coming quarters, Deutsche Bank said Nokia will have €1 billion in cash by the end of next year, down from €3.6 billion at the end of June. Bernstein said Nokia's current level of cash doesn't consider "hidden liabilities that investors should adjust for," such as negative operating working capital, accrued expenses, accounting provisions and funds that Nokia will have to return to Microsoft under their Windows licensing commitment. Write to Sven Grundberg at sven.grundberg@dowjones.com via Technology - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNG-rb33DIWUrui0NgxbqdvAsEOZxw&url=http://online.wsj.com/article/SB10001424127887324202304579050980871905004.html

Put the internet to work for you. via Personal Recipe 2598265