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Nokia(NOK - Get Report), the $10.45 billion handset maker that's seen share prices fall by more than 40% since the first trading session of 2012. In the last decade and change, the Finnish firm has gone from being a global innovator in the cellular phone market to playing catch-up, and consumers have taken notice. Revenue is down more than 30% in the last three years, profits turned into losses, and the firm has been hoarding its war chest to stay afloat.
Luckily for Nokia, that's a pretty big war chest. The firm currently holds more than $10 billion in cash and investments, offset by a debt position that eats around half of that balance sheet liquidity.
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While that gives Nokia some margin of comfort, it's not going to last long at the cash burn rate that the firm is currently seeing. That deteriorating balance sheet is a sort of positive feedback loop. As NOK sheds cash, its debt becomes riskier and pricier to service.
Investors are counting on a safety net from
Microsoft(MSFT). With the firms' partnership already scoring Nokia a $1 billion annual payout from Redmond in exchange for using the Windows Phone OS, there's a precedent for a deal between the two - especially after
Google's(GOOG) Motorola Mobility purchase. But Microsoft has already been in the handset business to less than stellar effect, so while MSFT may lend support to Nokia, I think it's unlikely they'll make a lucrative bid for shareholders.
I'd recommend exiting Nokia before this firm depletes more cash from its balance sheet.
To see these cash burners in action, check out the
Cash Burner Stocks 2012 portfolio on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.