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Back from the brink: Nokia climbs on positive numbers

Microsoft CEO Steve Ballmer, left, and Nokia president and CEO Stephen Elop unveil the Nokia Lumia 920 and Nokia Lumia 820 in New York, Sept. 5, 2012.

Diane Bondareff/AP

In the punishing global smartphone wars, even the battered and bruised get a second chance.

Shares of Nokia Corp. leapt more than 10 per cent Thursday on a pre-release of positive fourth-quarter profit and sales numbers, showing a return to marginal profitability for its previously flailing mobile unit and a surprisingly big jump in smartphone sales.

The mobile giant, once the king of the wireless industry, stumbled in recent years as Apple Inc. and Samsung Electronics Co. Ltd. rose to the top of the fast-changing mobile market with their sleek smartphones. The competition was so intense that last year Nokia was forced to raise cash by selling and leasing back its headquarters in Espoo, Finland.

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Though not proof of a sustained turnaround at Nokia, Thursday's results show the fast pace of change in the global wireless industry – where smartphones are replaced by fickle consumers faster than most other technology products. Faded industry stars such as Nokia and Research In Motion Ltd. are mounting credible comebacks in the shifting landscape, while the current champion, Apple, is forced to weather a recent drop in its share price amid signs of cooling growth.

"Nokia and RIM still have reason to believe there's room in the market for alternatives in the form of Windows Phone and BlackBerry," said Kevin Restivo, an analyst at market research firm IDC. Google's Android operating system, used by Samsung, and Apple's iOS "haven't completely sewn up the mobile operating system market," he said.

Nokia sold 4.4 million of its top-shelf Lumia smartphones in the fourth quarter, as well as 9.3 million lower-cost Asha touchscreen phones. Both were big increases from the third quarter, in which Nokia sold only 2.9 million Lumia devices and 6.5 million Asha units. In addition, the telecommunications network side of the business, Nokia Siemens Networks, had sales of €4-billion ($5.2-billion), and nearly doubled its operating margins to 15 per cent.

"It's a good start to the year for Nokia," said Mr. Restivo, "but they're not yet a phoenix rising from the ashes."

At the helm of the battered company, Nokia's Canadian CEO Stephen Elop remains under pressure to mount a comeback after a bold partnership deal to run Microsoft Corp.'s Windows Phone software failed to bolster flagging sales throughout 2012.

Nokia reports its full fourth quarter Jan. 24. Mobile phone companies tend to sell more phones in the fourth quarter because of holiday shopping. But through cost cutting and layoffs, Nokia also managed to improve its operating margins.

Neil Mawston, an analyst at Strategy Analytics in the United Kingdom, said Nokia is essentially stabilizing the business, halting sales declines while restructuring to boost profitability.

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"Nokia is going for an L-shaped recovery at the moment," he says. "Much of the worst, so far, seems to be over. Nokia seems to be stabilizing. The question now is whether Nokia can turn that L-shape into a U-shape, or potentially even a V-shape, in the next year or two."

Nokia desperately needs good news: Over the last year it continued to lose ground to Apple and Samsung globally. And even the fourth quarter's shipments of Windows Phone-based Lumia units were, according to National Bank Financial analyst Kris Thompson, "a drop in the bucket."

Still, despite its fall from the top of the industry, Nokia shipped 79.6 million cheaper mobile phones – including the touchscreen Asha, which is selling well in emerging markets such as Nigeria – and 6.6 million higher value smartphones around the world in the quarter. These results follow a torrent of apocalyptic rhetoric from Nokia critics – including a former Nokia executive, Tomi Ahonen, who has called repeatedly for Mr. Elop to be fired.

The results may warm the hearts of RIM supporters as well. Both technology companies have failed to maintain success in the heavily watched U.S. market, but are still popular in developing countries in Asia and Africa – where big populations are starting to adopt smartphones.

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