Nokia Wants to Go From Owning to Renting

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Struggling Finnish phone maker Nokia (NYSE: NOK  ) is in something of a cash crunch these days. At the end of last quarter, Nokia was sitting on a net cash position of approximately $5.4 billion. It generated operating cash flow of $131.6 million, but net cash was down sequentially.

Nokia is aggressively working on a cost reduction plan, hoping to reduce non-IFRS operating expenses in its devices and services segment by $3.9 billion annually by the end of next year. Part of that plan includes laying off 10,000 workers, the deepest and latest of job cuts over the past couple years. According to a recent Reuters report, that now includes potentially selling its own headquarters.

A company spokeswoman said that Nokia is looking at various options to jettison "non-core" assets like real estate. The building is worth between $259 million and $388 million, and is located near the Baltic Sea. Nokia has no plans on moving out of Finland or the building, and would likely lease back the same building after selling it. In an email to TechCrunch, Nokia said its core business isn't owning real estate, so it "makes common business sense" not to tie up its assets in property.

So Nokia is considering going from owning to renting in a move that would bring in some cash upfront and reload its coffers, buying it more time for its turnaround. The company is counting on Microsoft (Nasdaq: MSFT  ) Windows Phone 8 to succeed, along with its new flagship Lumia 920. The software giant is looking at two major platform releases this fall, Windows 8 and Windows Phone 8, and Nokia is playing a prominent role in the latter.

Windows Phone is seeing adoption rise throughout Europe, Nokia's home turf, and even surpassed Research In Motion (Nasdaq: RIMM  ) in Italy. Ironically, tough macroeconomic conditions are driving up sales of low-end Nokia devices like the Lumia 610, which runs the older Windows Phone 7.

Nokia may be down, but it's not out.

Microsoft and Nokia both have a lot riding on the software giant's next-generation operating system platforms. Microsoft needs them both to succeed to reinvigorate its biggest cash cows. Read our premium report on the software giant by clicking here now.


Evan Niu, CFA, has no positions in the stocks mentioned above. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (2)

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  • Report this Comment On October 03, 2012, at 10:01 PM, llIlllIlllIlllIl wrote:

    So net cash of $5.4 billion constitutes a "cash crunch" these days? Buying more time? What? Ridiculous utter nonsense.

    Nokia is focussing on its core business and that includes offloading non-core assets to reinvest the capital in core areas. This is part of the transition plan to become a more lean and strongly focussed company after getting bloated after being the top phone maker in the world for 16 years straight.

    Thank god they now have competent management and the balls to get things done.

  • Report this Comment On October 04, 2012, at 4:28 PM, SUPERMANSTOCKS wrote:

    This article sounds like its made of on the fence type material

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