Will Nokia Corporation (NOK) Beat Earnings?
Finnish handset giant Nokia (NOK), which will report earnings this Thursday, is closely watched by analysts for hints to the future of the smartphone market. Carnegie analysts in Finland currently forecast Nokia to ship 5.9 million smartphones (including 4.9 million flagship Lumia units) in the first quarter. Although demand has been unexpectedly strong for its Lumia 920 handset, which runs on Microsoft (MSFT) Windows Phone 8, Nokia has run into slight delivery problems for pre-orders.
These problems are expected to adversely impact its top line. Daily Chart
Investors should remember that shipments and sell-through are different things. While Nokia (and other smartphone manufacturers) report the number of units shipped to retailers, they don't actually report the amount of units sold by the retailers (sell-through) until one or two quarters later. So therefore, although shipments of Nokia's handsets has been risen, its staying power on the consumer end has yet to be determined. Carnegie's two analysts that cover Nokia, Matti Riikonen and Bruce Diesen, noted that Nokia's exit from its 50% partnership with Siemens, Nokia Siemens Network (NSN), which is worth approximately 8.6 ($11.25) billion, would unpredictability alter its top line fundamentals. Riikonen and Diesen estimate that the NSN partnership is worth roughly 1.2 ($1.57) per share, and exiting the partnership would free up some much needed capital for forward-looking investments. Therefore, investors should take into account the cancellation of the NSN partnership into earnings expectations for the company. Cash and short term investments has been a sore spot for Nokia. In 2012, Nokia's cash position declined from 4.4 ($5.75) billion to 4 ($5.23) billion due to increased investments in the Nokia World Conference (NWC). Meanwhile, Carnegie remains optimistic regarding the performance of Nokia's smartphone performance in North America. Although the market share gained by Nokia Windows Phones seems small, at less than 3% compared to the 93% controlled by Apple (AAPL
) iOS and Google (GOOG
) Android, it represents positive growth that had until now eluded the company. Nokia's handsets (both "dumbphones" and smartphones) are also the cheapest in the market, which has helped it gain an edge in emerging markets. Its Asha smartphone in India has gained considerable momentum over the last quarter. In the United States, Nokia has strong support from carriers such as AT&T (T
), Verizon (VZ
) and T-Mobile, and will later expand its presence into Wal-Mart (WMT
) stores and Microsoft's own brick-and-mortar retail locations. Lastly, several analysts believe that Nokia's patent portfolio could help it boost its cash flow, by winning patent litigation suits against Android smartphone manufacturers. Nokia currently has pending cases against Viewsonic and HTC for alleged patent violations. Prior to its first quarter earnings, Nokia trades at 23.7 times forward earnings - not cheap by any standard - and its dividend has been suspended to conserve cash. The stock trades with a 5-year PEG ratio of 8.70. Other News About NOK Nokia Corporation Q1 Will Not Yet Reflect Full Potential
What will investors see with Nokia's first quarter earnings? Nokia Corporation Not Likely To Miss Est. In Q1: JP Morgan
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Published on Apr 16, 2013
By Leo Sun