Positive Outlook Helps Nokia Corporation (ADR) (NYSE:NOK) To Zoom
Nokia Corporation (ADR) (NYSE:NOK) released its much awaited 3Q13 earnings with its core Nokia Solutions and Networks (NSN)’s operating profit at 218 millioneuros and sales at 5.2 billion euros, suggesting a decline of 33% and 24% respectively, compared to 3Q12. The profit for 3Q13 remained below the analysts’ average expectation of 228 million euros. However the company anticipates strong growth in NSN’s European business during the final quarter as it believes telecoms carriers to spend more on high speed LTE wireless broadband networks.
The head of Nokia’s NSN business, Rajeev Suri said to investors on a conference call that LTE will see better growth in Europe starting 4Q13. Investors now believe that the outlook justifies Nokia’s decision to sell the handsets business.
Mika Heikkila, Fund manager at Taaleritehdas, an asset management company, said Nokia is beginning to have a direction and the handset business deal with Microsoft Corporation (NASDAQ:MSFT) looks like a smart move from investor’s perspective. Mika added that the outlook soothed the slowdown fear especially when the rival network equipment firm Ericsson (ADR) (NASDAQ:ERIC) reported lower than expected earnings last week.
After Microsoft deal, NSN now accounts for over 90% of company’s sales. NSN is engaged in selling range of mobile broadband equipment to network operators and has already put itself on track over the past year from loss making segment to a source of cash. NSN is focusing on more profitable deals to build high speed wireless networks besides turning down low-margin contracts and checking cost cutting measures.
With NSN contributing 1.5 billion euros to an actual 2.4 billion euros in net cash, Nokia said, had the Microsoft deal already been completed, it would have ended 3Q13 with net cash of 7.5 billion euros.
The 3Q13 also showed 19% quarter-on-quarter growth in Lumia smartphone sales to 8.8 million units with strong demand for Lumia 520 and launch of more models. However the market leader Samsung Electronics shipped ten times more smartphones with volume of 88.4 million.