Nokia to raise cash by selling its headquarters

Two months ago, we reported that Nokia was evaluating the possibility of selling its main headquarters in Espoo, Finland. It seems that the Finnish handset maker completed that evaluation, because the company has found a buyer for its three buildings and parking spaces. 

Nokia has sold the real estate to Exilion Capital, a Finnish property and investment group, for the amount of 170 million euros ($223m). That's a lower price than Nokia originally had in mind two months ago, when it estimated the sale would bring in between 200 and 300 million euros. Nokia won't be looking for a new headquarters, however, because the company will continue to lease the buildings in order to reduce costs.

In a statement, Nokia CFO Timo Ihamuotila explains why the company is selling its headquarters:

"We had a comprehensive sales process with both Finnish and foreign investors and we are very pleased with this outcome. As we have said before, owning real estate is not part of Nokia's core business and when good opportunities arise we are willing to exit these types of non-core assets. We are naturally continuing to operate in our head office building on a long-term basis."

The deal should be completed by the end of 2012, but it remains to be seen if the 170 million euro will help the company to overcome its financial struggles. Nokia wants to save 1.6 billion euros by the end of 2013. Earlier this year, Nokia announced it would "sharpen its strategy" by cutting 10,000 jobs worldwide. Nokia still has 3.6 billion euros in direct cash reserves, but lost 576 million euros in the third quarter of 2012.

Source: Nokia via CNET | Image via Wikipedia

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24 Comments

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Nokia must last. I always loved my first smart phone by Nokia. Oh and mind you, this is well before the whole iPhone fiasco.

red hook said,
Microsoft needs to just buy NOK already.


They will when Nokia would pay to sell itself. (disclaimer: slight exaggeration)
Smart guys if they actually follow that strategy, because if Nokia DOES stay afloat itself, they will have a strong independent partner, which also has some benefits surely I guess.

GS:mac

Glassed Silver said,

They will when Nokia would pay to sell itself. (disclaimer: slight exaggeration)
Smart guys if they actually follow that strategy, because if Nokia DOES stay afloat itself, they will have a strong independent partner, which also has some benefits surely I guess.

GS:mac


Its Nokia, Nokia isnt going anywhere. With the limited time and experience, they created a Phone that outdoes the S3 and Iphone5 (except not in raw CPU performance) but in functionalities, possibilities and UI speed/smoothness. (altho the Iphone5 feels really smooth too, just to static for my taste) and on the S3 i continously encounter laggy UI. Swiping in the homescreen to access other apps on the screen often shows framedrops or just laggy behaviour. For a quad core ARM that is really, really disapointing.
Also the number of Iphones and Samsungs i see with broken glass, is quite a high percentage. Im sure at least 1/3rd of the people owning Iphones or Samsungs experienced broken glass by stupidity.

We're all raised here in Holland with Nokia's, the indestructable phones (the US Nokia was rather small and unknown) you can throw them on your bed, and if they bounce of... nothing, worst case scenario is having to press together your cover. Now a Phone bounces off it will break on impact with the floor.
Or just being inconsiderate with your Phone, throwing it, dropping it. We where all able to do so untill the iPhone's and similar took over the market.
Now Nokia is back, with a similar unbreakable Phone, a 3310 of the smart phones.
People want a device they can neglect. Not fancy apps or anything. It has to feel 'speedy/smooth' 'have allot of apps' and 'doesnt break when it drops a 30cm drop on wood'.

Kalint said,
Damn, that is a nice HQ. Too bad Nokia.

They are not moving. They are selling the buildings to a company and nokia will then lease the buildings from them. Its cheaper this way then to own the building outright.

majortom1981 said,

They are not moving. They are selling the buildings to a company and nokia will then lease the buildings from them. Its cheaper this way then to own the building outright.

ah, I should probably read the article and not just look at the picture.

Keep in mind this means nothing. Computer associates did this here on long island. They found it cheaper to rent the headquarters then own it themselves. They have been doing well ever since.

Shame, they had a opurtunity to use the Windows Phone exclusive rights of modification and source to make some really great hardware however they lost that last chance of saving the company too.

HTC / Samsung are making same phones with similar software usability then what was that exclusive benefit went what Nokia suppose to have ?

It's all about cash flows. If they can flow cash into their mobile phone business, the losses won't matter. Right now their cash flow is zero, so they need to sort that out. Worrying about real estate is a minor concern. They need to keep pushing until they go positive; and given how I think the Lumia 920 is selling... it shouldn't be too long (fingers crossed).

When the Lumia hits China it will be the beginning of a good thing for Nokia.

Well if you look at their Q1 Interim report in Q1 2011 they only sold 1.2m devices in North America and 0.6m in Q1 2012. Since then I think it's grew to at least a few million per quarter. Nokia's biggest loss was China from 23.9m to 9.2m and in Europe 23.4m to 15.8m. I wouldn't be surprised if Nokia managed to pull off a profit in either Q4 2012 or Q1 2013. Since Nokia cut losses to $750m in Q3 2012, they have released the two new devices which seem to be selling well and the Asha handsets seem to be gaining some traction.

This was talked about months ago wasn't it? Anyways, leasing the building instead of flat out owning it saves you money in a few ways. The initial cash they get from the sale itself isn't all there is to it.

GP007 said,
This was talked about months ago wasn't it? Anyways, leasing the building instead of flat out owning it saves you money in a few ways. The initial cash they get from the sale itself isn't all there is to it.

It'll give them a lump sum but must surely increase costs in the long term, big quarterly rent bill surely?

thealexweb said,

It'll give them a lump sum but must surely increase costs in the long term, big quarterly rent bill surely?

It's cheaper to rent than to own the whole thing from what I understand. This in the end will lower their costs not raise them. You need to take other factors into account like property taxes and other building/property related expenses that they don't have to worry about.

GP007 said,

It's cheaper to rent than to own the whole thing from what I understand. This in the end will lower their costs not raise them. You need to take other factors into account like property taxes and other building/property related expenses that they don't have to worry about.

But then how does the new property owner's business work? Don't they have to pay the same costs that Nokia used to pay? And if now Nokia is paying less to them than they were paying, aren't they losing money?

mrp04 said,

But then how does the new property owner's business work? Don't they have to pay the same costs that Nokia used to pay? And if now Nokia is paying less to them than they were paying, aren't they losing money?


Nokia pays rent and whatever utilities they use still, but they don't have the added costs of property taxes to worry about for one thing. The land owner pays that and has to take care of anything else regarding maintaining the building itself etc. Rent is cheaper than paying god knows what on taxes and whatever other services are needed. The property owner doesn't pay all the bills though so in the end he does gain something.

Also, maybe there's some extra space in the building itself that Nokia wasn't using, that can also be rented out to someone else etc.

mrp04 said,

But then how does the new property owner's business work? Don't they have to pay the same costs that Nokia used to pay? And if now Nokia is paying less to them than they were paying, aren't they losing money?


They probably own allot of buildings and lease those, thus spreading the costs of hiring people to fix things, upgrade etc. as these people can be divived over multiple buildings. Instead of Nokia hiring these people themselfs. Someone has to clean the windows etc. Due to their buyer being able to do this allot cheaper then Nokia itself, they rent back the place.. Win-Win situation.

Shadowzz said,

They probably own allot of buildings and lease those, thus spreading the costs of hiring people to fix things, upgrade etc.

there is NO WAY, in the long term, this will be a savings to Nokia. From the moment they sell it, it becomes a cost, and a drag on profits.

They don't employ people to wash windows etc, they (like every other building owner) have a facility manager, who is likely the same one hundreds or thousands of other building owners have, so their facility manager has the economies of scale to maintain the building.

As for the land tax argument, that's another furphy, the new owner would have to pay them, therefore it would be included in the rent the lessee (Nokia) pays.

This is nothing but bad news for Nokia, if they are still around in 5 years time, they will likely be paying the same in annual rent, as they sold the ENTIRE building for today.

dvb2000 said,

there is NO WAY, in the long term, this will be a savings to Nokia. From the moment they sell it, it becomes a cost, and a drag on profits.

They don't employ people to wash windows etc, they (like every other building owner) have a facility manager, who is likely the same one hundreds or thousands of other building owners have, so their facility manager has the economies of scale to maintain the building.

As for the land tax argument, that's another furphy, the new owner would have to pay them, therefore it would be included in the rent the lessee (Nokia) pays.

This is nothing but bad news for Nokia, if they are still around in 5 years time, they will likely be paying the same in annual rent, as they sold the ENTIRE building for today.


Dude seriously, you think owning a building is free of dragging costs?
Indeed they use 3rd parties to clean up everything now, wash the windows etc.
But they're paying the frontrow price.
Its all about bulk. The more you have, the cheaper it is to have/produce it.
Owning allot of buildings is cheaper per building then just having a small handfull of them.
Almost every company doesnt directly own their buildings but lease it. Must be because its much more expensive!

I appreciate the company is in transition but these losses cannot be sustained for very long. I know we all got used to the term "cash burn" during the dot com boom days but in the current market it just will not wash.

grabageek said,
I appreciate the company is in transition but these losses cannot be sustained for very long. I know we all got used to the term "cash burn" during the dot com boom days but in the current market it just will not wash.

agree, they need to diversify and make an android phone to raise some cash pronto

dotslash said,

agree, they need to diversify and make an android phone to raise some cash pronto


do you even know what "raising cash" here actually means? My goodness, leave a hole and android fans start pouring in.

FalseAgent said,

do you even know what "raising cash" here actually means? My goodness, leave a hole and android fans start pouring in.

More than aware of what it means but a company generating sustained losses would have to borrow at a higher rate. Another option is to sell new shares which is a possible option (i.e. MS could buy in to Nokia)