Nokia to Return $4.4 Billion to Shareholders
October 29 2015 - 8:10AM
Dow Jones News
Nokia Corp. will return €4 billion ($4.4 billion) to
shareholders as it expects savings from its proposed Alcatel-Lucent
acquisition to materialize one year ahead of schedule, driving
shares in both companies higher even as they reported worsened
third-quarter results.
The Finnish maker of high-speed mobile networks on Thursday said
shareholders will receive an ordinary dividend of at least €0.15 a
share in both 2015 and 2016, plus a special dividend of €0.10 a
share, subject to approval next year. In addition, it plans to
kick-off a two-year €1.5 billion share repurchase program.
A further €3 billion will be spent on reducing debt next year,
it said.
Nokia, which expects to complete its €15.6 billion acquisition
of French rival Alcatel-Lucent in early 2016, said it now expects
annual savings of €900 million to materialize in 2018 instead of
2019.
Nokia Chief Executive Rajeev Suri said he hoped the accelerated
target, combined with a new capital structure optimization program,
would give Alcatel-Lucent shareholders confidence in tendering
their shares for the proposed swap.
Nokia and Alcatel-Lucent shares soared on the Helsinki and Paris
bourses on Thursday. Both were up by about 9% midmorning.
Nokia on Thursday posted net profit of €152 million for the
third quarter, down from the €747 million a year earlier, when the
figure was boosted by a large tax gain.
Third-quarter revenue for its mainstay Networks unit fell 2% to
€2.88 billion, as the rollout of mobile broadband slowed compared
with last year, partially offset by growth for its services
business. At constant currency, Nokia Networks net sales would have
decreased 11% year-over-year, the company said, mainly due to lower
sales in North America.
Nokia raised the profitability target for its Networks business
and now expects its full-year operating margin for the unit to be
around "slightly below the high-end" of its long-term 8% to 11%
target. Previously it had expected the margin to be at the midpoint
of its target range.
The operating profit margin at its Networks unit was 13.6% in
the third quarter, compared with 13.5% in the year-earlier period
and 11.5% in the second quarter this year.
Alcatel-Lucent, which also reported Thursday morning, posted a
widening loss in the three months to Sept. 30, hit by a noncash
goodwill impairment charge. The company continued to burn cash in
the third quarter, reporting a €96 million free cash flow loss,
compared with a free cash flow loss of €81 million a year
earlier.
Still, the company underscored its commitment to report its
first-ever full-year of positive free cash flow in 2015. It also
reported an improved gross margin of 34.5% and lower operating
expenses.
"These results demonstrate that both companies are in excellent
shape ahead of the merger," research firm Sanford C. Bernstein
said.
Once the world's leading supplier of mobile handsets, Nokia is
redesigning itself into a global supplier of equipment and software
to telecom operators.
The acquisition of Alcatel-Lucent, which has secured regulatory
approval but still needs approval from Nokia's shareholders, could
lift the merged companies into the same revenue league as market
leaders, Ericsson AB of Sweden and Huawei Technologies Co. of
China.
Aside savings, the enlarged company could get more pricing power
to negotiate with big customers.
"I continue to believe that the acquisition of Alcatel-Lucent
provides a very strong long-term value creation opportunity," Mr.
Suri said.
Sam Schechner contributed to this article.
Write to Jens Hansegard at jens.hansegard@wsj.com
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(END) Dow Jones Newswires
October 29, 2015 07:55 ET (11:55 GMT)
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