How Nokia returned to profitability
Nokia stock is up by almost 7 percent Thursday morning on news of a strong third quarter. Not only was revenue up 13 percent year-over-year, but the company's profit grew by 450 percent after excluding a restructuring charge after selling its device business to Microsoft (MSFT) and a goodwill write down of its mapping business.
Nokia may have sold off the business that brought it the greatest recognition, but the decision has apparently been strategic gold, as management can focus on profitable areas not dominated by the likes of Samsung and Apple (AAPL).
After selling the devices division to Microsoft, Nokia has been left with three operating groups: Networks, HERE, and Technologies. Networks provides mobile broadband equipment to carriers, HERE operates a mapping and location intelligence business and Technologies owns and licenses intellectual property, particularly in mobile and wireless.
Nokia Networks revenue was up by 13 percent year-over-year owing largely to new LTE wireless mobile network deployments in North America and China. The operating profit was 13.5 percent of revenue.
Nokia HERE business was up 12 percent. It licensed map data to embedded navigation systems in 3.2 million new cars, versus 2.6 million vehicles last year.
Nokia Technologies was a major beneficiary of the deal with Microsoft, which has to license patented developments to operate the device business. Revenue for that group was up 9 percent.
In all, Nokia seemed to demonstrate an old business adage that an ailing division can divert enough attention from corporate management to keep a company from operating effectively. For years the poorly performing devices division was a loadstone tied to the neck of the corporation. A source of major economic activity and employment in the company's native Finland, it was difficult to suggest unloading the division, or to find a potential buyer.
Microsoft's interest in focusing more on consumer devices to push its mobile initiatives in Windows was fortuitous.