Nokia Corporation (ADR) (NYSE:NOK) stocks reacted positively to the appointment of Rajeev Suri as the new chief executive officer. The shares gained the most in six months after the Finnish company announced plans to spend around 5 billion euros ($6.9 billion) on dividends, share buybacks and debt reduction.
Nokia’s networks division facing bigger challenges
With Suri as the new CEO, Nokia’s search for a replacement for Stephen Elop, who moved to Microsoft Corporation (NASDAQ:MSFT) after the completion of the $7.5 billion deal for Nokia’s handset division, has ended. Suri, 49-year-old was previously the head of Nokia’s networks division.
With no more handset business, Nokia Corporation (ADR)(NYSE:NOK) now plans to focus on wireless-network equipment. Suri has led the segment for four years, but now faces bigger challenges in the form of Ericsson AB and Huawei Technologies Co. Suri will have come out with measures to reverse the declining equipment revenue, which presently contributes around 90% of Nokia’s sales.
Hannu Rauhala, an analyst at Pohjola Bank in Helsinki, said, “Suri is a strong choice as CEO,” and added, “The industry is going through a major shift to software-defined networking so he certainly has plenty of work ahead of him.”
Nokia may go for small acquisitions
After the sale of the phone division, Nokia Corporation (ADR)(NYSE:NOK) now has three businesses to focus: the networks division, maps business, and the unit responsible for licensing its patents. Even after the dividend and buybacks, the company will have enough cash to make further investment. If the deal with Microsoft were concluded in March then Nokia would have had 7.1 billion euros in net cash. Last week, the company said that the proceeds including the patent-licensing fees may be marginally higher than the 5.44 billion euros originally agreed.
Suri in an interview, on Tuesday, revealed that Nokia Corporation (ADR)(NYSE:NOK) could use the cash to make “small” acquisitions needed to fill the gaps in its product line-up.
Nokia Corporation (ADR)(NYSE:NOK) announced plans to distribute around 800 million euros in ordinary dividends for last year and 2014, and also a one-time dividend of 1 billion euros, or 26 cents a share, payable on July 3. The Finnish firm, also, revealed a buyback plan 1.25 billion euros over two years. Nokia, also, plans to lower its debt by around 2 billion euros by the end of the second quarter of 2016 to better its debt rating.
On Tuesday, Nokia shares closed up 5.69% on NYSE at $7.43.