Analysts claim Nokia's survival 'under threat' as giant burns through cash reserves

Could be spent out by 2014

Analysts claim Nokia's survival 'under threat' as giant burns through cash reserves
Analysts believe Nokia's longterm existence is under threat, following claims the manufacturer risks draining its cash reserves over the course of the next couple of years.

Critics claim the Finnish firm's current spending is unsustainable, with Nokia having severely reduced its reserves to €4.9 billion (around $6.5 billion) in recent quarters as it plays catch up with Samsung and Apple.

A matter of time

Nokia's survival, it appears, all hinges on timing.

Analysts predict Nokia will sell 46 million Windows Phone handsets in 2013, up significantly on the 20 million it's expected to push out this year.

However, others have cast doubt on whether the manufacturer will have the funds to survive even that long.

The company posted a $1.8 billion loss in Q1 2012, and the most pessimistic of analysts believe there's a chance its reserves will already have run dry by the time its Lumia handsets start to make significant ground in the smartphone market.

"Such an additional fall could be enough to burn through most of Nokia's existing cash pile and even bring into question Nokia's very survival," commented SocGen analyst Andy Perkins said in a note.

Falling giant

Nokia remains the second largest mobile manufacturer in the world according to Gartner, with around 19 percent market share – down from the 25 percent hand the company boasted a year previously.

Even more important, however, is the role it's playing in expanding Microsoft's Windows Phone footprint.

So far, the two parties haven't extended beyond the original strategic alliance they signed back in early 2011.

Any threat to Nokia's continued survival, however, would likely raise the prospect of a full-scale buyout by Microsoft – the company unlikely to tolerate the biggest cog in its wheel grinding to a halt.

In for the long haul

Other analysts, however, claim Nokia's situation isn't nearly as dire as some are making out.

"The group appears to have sufficient liquidity, even under some reasonably onerous operating assumptions," concluded European Credit management lead portfolio manager Jens Vanbrabant.

Nokia has previously suggested it doesn't expect to see a sharp turnaround in its fortunes, admitting it let its rivals gain the upper hand in the smartphone market.

"When you have such strong competitors in the marketplace it will take a bit of time but things are going well," said chairman Ollila Jorman at the start of May.

"Four years from mid-2008 to today the returns have not been where they should have been. The company saw it and it was broadly accepted but the software capability and particularly the platform software knowhow was not there.

"The competitors were faster, and bringing their solutions to the marketplace faster."

[source: Reuters]

With a fine eye for detail, Keith Andrew is fuelled by strong coffee, Kylie Minogue and the shapely curve of a san serif font.