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Nokia makes strong profit in year of 'first steps' after Microsoft sale

Nokia made a better-than-expected profit in 2014 as it transforms after selling its phone business to Microsoft.


Nokia had a good year after selling off its phones business, making a better-than-expected net profit of €443 million (roughly $505 million, £330 million, or AU$637 million) in 2014.

It's too early to tell how the company's return to hardware with the N1 tablet is going, but one expert believes the tablet is "just a first step" in what is "an exciting time for Nokia" as it transforms its business.

Finnish company Nokia has long been best known for its phones, but it also produces network equipment and mapping data, which is licensed to other companies under the Here brand. Having sold the part of the business that makes phones to Microsoft last April, it's those other parts of the business that continue, reporting their annual financial results today.

The Nokia Networks unit did well on the back of improved sales in North America, particularly thanks to higher-margin 4G equipment. And it was a strong year for Here, Nokia's navigation and mapping business. This division saw a 15 percent growth in net sales year-on-year, due to increased sales in the automotive space and licensing arrangements with Microsoft.

Nokia conceded this was offset by declines in the personal navigation device market -- a category of products that has seen sales fall across the board. But Here is in a good position: it's both a B2B proposition, licensing its data to other companies, and a customer-facing proposition, including an Android app.

As part of the device and services sale, Microsoft has the right to use the Nokia brand on phones like the super-cheap Nokia 215 , although it has now phased out the Nokia name for its Lumia smartphones. In the meantime Nokia itself has turned to tablets with the affordable Nokia N1 Android tablet , manufactured in China.

Nokia President and CEO Rajeev Suri called out the N1 for special attention in the results release, saying the early reception for the device had been "remarkably favourable" and showed "the ongoing power of the Nokia brand and the long-term potential of [Nokia's] brand licensing business". However, industry analyst Ian Fogg of IHS points out that the N1 has only been on sale a few short weeks, so it's too early to know how the tablet is performing.

The Nokia N1 tablet. Nokia

The N1 is "clearly not a one-off product", says Fogg, and "however it does in the market, it's just a first step". Although Nokia can't produce a smartphone in the foreseeable future -- a caveat of the deal with Microsoft -- it still retains patents and intellectual property that Fogg believes could see the company produce more tablets or even devices in the realm of music players, laptop-type devices, imaging and more.

While Nokia has been through a period of upheaval, Rajeev Suri was positive about the road ahead.

"2014 was a time of significant change for Nokia and we ended the year in a renewed position of strength," the CEO said. "Looking ahead, while 2014 was a year of reinvention, we see 2015 as a year of execution. We are already moving fast, with Here sharpening its strategic focus, Nokia Technologies accelerating its licensing and innovation activities, and Nokia Networks increasing its momentum in growth areas including virtualization and telco cloud.

"As we pursue these opportunities, we will not shy away from investing where we need to invest."