Struggling handset maker Nokia has posted an operating profit of €439m in 4Q12, up from a loss of €954m recorded in the same quarter of 2011. Despite the turnaround, the Finnish firm saw quarterly sales drop year-on-year from €10bn to €8.04bn.

Net sales for the year stood at €30.2bn, down from the €38.7bn recorded in 2011, while the operating loss made by the firm in 2012 was more than twice as deep as that recorded a year earlier; down to €2.3bn from €1.1bn.

The firm said in a statement that no dividend payment will be made to shareholders in 2012, to “ensure strategic flexibility”.

“We are very encouraged that our team’s execution against our business strategy has started to translate into financial results,” commented Nokia CEO Stephen Elop. “We remain focused on moving through our transition, which includes continuing to improve our product competitiveness, accelerate the way we operate and manage our costs effectively. All of these efforts are aimed at improving our financial performance and delivering more value to our shareholders.”

Nokia’s results are in the short term encouraging, but in the longer term irrelevant, according to Victor Basta, managing director of M&A advisors to the technology industry Magister Advisors. He added that the declining performance illustrates the importance of software in the mobile industry.

“Margins and prices for devices are eroding for all players. Unfortunately for Nokia the potential software value is now Microsoft’s, which has gained a key channel for Windows into the mobile channel without having to buy Nokia and its problems,” he said.

He added that Nokia’s one remaining chance at global importance lies in emerging markets.

“While price competition is intense there, Nokia has a strong brand name and distribution into key developing markets. They should consider splitting their emerging markets business into a separate company, which could apply greater focus on this major opportunity.”

Basta added that rival RIM’s next results are likely to underscore the same trend, as the Canadian manufacturer is also at heart a hardware company, and one without a strong software partner.

“RIM’s quarterly developments and new launches are, again, short term encouraging but irrelevant in the longer term. Without a software-centered strategy, neither RIM nor Nokia can have enduring value.”

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