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Is Nokia Bailing on Smartphones?

http://www.fool.com/investing/general/2013/07/03/is-nokia-bailing-on-smartphones.aspx

Evan Niu, CFA
July 3, 2013

Nokia (NYSE: NOK) just made a rather curious move. The Finnish smartphone maker recently announced that it would be acquiring Siemens' (NYSE: SI) 50% stake of the pair's Nokia Siemens Networks, or NSN, joint venture. The total price tag is expected to be 1.7 billion euros and should close this quarter. That will make it a wholly owned subsidiary.

As Nokia has been in the midst of its turnaround, investors have been keeping a close eye on its cash position and cash burn rates. Nokia's numerous rounds of layoffs have been in pursuit of cash savings, and Nokia's debt rating was cut into junk territory a year ago. At the end of the first quarter, Nokia was sitting on a net cash position of 4.5 billion euros. Nokia has secured bank financing for 1.2 billion euros, and Siemens is spotting Nokia the remaining 500 million euros.

Nokia estimates that it closed the second quarter with 3.7 billion to 4.2 billion euros in net cash, down 300 million to 800 million euros sequentially.

For a company that should be thrifty given its current financial standing, Nokia just spent a big chunk of change. That's renewed some speculation that the company could be preparing to sell off the smartphone segment, even as Lumia unit volumes are on the rise. J.P. Morgan analyst Sandeep Deshpande thinks the NSN move could indicate that Nokia is thinking about selling off the handset segment, although it's far from conclusive.

The NSN segment is more profitable than the devices and services business, with an adjusted operating margin of 7%. In contrast