Nokia Looks to Sell Head Quarters to Raise Cash

What a fall for the once mighty Nokia.  From literally lording over the whole mobile phone market worldwide to now having to sell its HQ in Finland to raise cash, its been a culmination of a series of missteps and huge mistakes on the part of the Helsinki based company.

Unable to compete with competitors like Samsung, Apple, HTC, LG, Sony Ericsson in smartphones, it was already on the death spiral.  The final nail in the coffin was its tying up with the buggy Windows platform for its future smartphones. Lets be fair. Microsoft hasnt been able to master making a bug free desktop Operating System even after being in the industry for more than 3 decades, a mobile Operating System was not up its alley.

And Nokia fell into the Microsoft trap by allying with them on their Windows platforms.  It should have stuck to its Symbian platform for the keypad based phones and diversified itself into using Android for its smartphones and at the same time invested in the Meego platform that it intended for smartphones.  Such diversifying would have kept Nokia afloat.  Now, by tying up with Microsoft, the end of Nokia is here, soon.

Pic source: Wikipedia

Nokia has started a process to sell off its headquarters outside Helsinki as the stricken Finnish mobile phone maker urgently looks for ways to conserve cash. The lossmaking company is looking to sell and lease back the building that employs 1,800 people in a move that could raise €200m-€300m, according to estimates. The move comes amid intense scrutiny of Nokia’s cash position after it burned through liquidity at a very fast pace around the turn of the year. In the second quarter of this year, its net cash position fell 14 per cent to €4.2bn due entirely to a dividend payment to investors.

“We have ample cash resources to do what we need. But to cut costs and conserve cash we are looking at all possible options with no stones being left unturned. One of those is the possibility of selling our headquarters,” Nokia said.

Nokia moved out of central Helsinki in 1996 to a striking glass and steel building on the edge of the sea in the neighbouring town of Espoo that it expanded in 2001 to its current size. It pointed to other Finnish companies that had sold and leased back their headquarters in recent years, including Kone, Stora Enso and UPM-Kymmene.

Nokia has sent documents out to interested parties but a sale is not imminent. It had earlier said, when it announced its second-quarter results, that it was looking to sell its property holdings around the world. “We are not a real estate company and we would rather invest in our core operations,” it said.

But analysts remain concerned about the level of cash burn as the company fights for survival following a series of disappointing product launches in an attempt to compete with Apple’s iPhone and companies using Google’s Android platform. Credit analysts stress that technology companies can go bust with positive cash balances, pointing to Nortel, which had several billions of dollars in cash on its balance sheet when it went bankrupt in 2009. Standard & Poor’s, the credit rating agency, said in August when it downgraded Nokia again that it expected the group to end this year with less than €3bn in net cash.

Nokia in return has touted its ability to squeeze cash out of its business, using advanced royalty payments on some of its patents to avoid a worse cash burn in the second quarter. It also has an undrawn credit line of €1.5bn, which is available until March 2016. Analysts have speculated that Nokia will soon have to cut its dividend to protect its remaining cash. Its first debt repayment is for €1.25bn in early 2014.

News source: FT