Nokia Corp.
(
NOK
), the beleaguered mobile handset developer, has managed to
outperform the Zacks Consensus Estimates in the third quarter of
2012. However, its flagship Windows-based smartphones failed to
generate any meaningful market traction. Management has provided
a disappointing outlook for the ensuing fourth quarter of 2012,
which will include the most important holiday season.
Quarterly net revenue was approximately $9,057 million, down
19% year over year, surpassing the Zacks Consensus Estimate of
$8,890 million. Quarterly net loss was approximately $1,180
million or a loss of 33 cents per share compared with a net loss
of $189 million or 3 cents per share in the prior-year quarter.
However, quarterly adjusted (excluding special items) loss per
share of 9 cents was better than the Zacks Consensus Estimate of
a loss of 12 cents.
Quarterly gross margin was 27.5% compared with 28.1% in the
year-ago quarter. Operating loss in the reported quarter was $721
million, up 711.3% year over year. Quarterly operating margin was
a negative 8% compared with a negative 0.8% in the year-ago
quarter.
At the end of the third quarter of 2012, Nokia had
approximately $10,984 million of cash and cash equivalents
compared with $13,641 million at the end of fiscal 2011. Total
debt, at the end of the reported quarter was $6,525 million
compared with $6,658 million at the end of fiscal 2011.
Devices & Services Segment
Quarterly total revenue was approximately $4,458 million, down
33.9% year over year. Within this segment, Smartdevices
(including smartphones and tablets) revenue was $1,221 million,
down 55.5% year over year. Mobile Phone revenue was $2,960
million, down 18.8% year over year. Other revenue was $277
million, down 21.9% year over year.
Smartdevices average selling price (ASP) was $194, up 18% year
over year. Mobile Phone ASP was $39, down 3% year over year. In
the third quarter of 2012, Nokia shipped 6.3 million Smartdevices
(including 2.9 million Lumia-series phones) and 76.6 million
Mobile Phones, down 63% year over year and 15% year over year,
respectively.
Nokia Siemens Network Segment
Quarterly net revenue was approximately $4,381 million, up
2.6% year over year. Quarterly adjusted operating profit was
approximately $228 million compared with an operating loss of
$143 million in the prior-year quarter. Adjusted operating margin
was 5.2% compared with a negative 3.3% in the prior-year
quarter.
Location & Commerce Segment
Quarterly net revenue was approximately $332 million, down 6%
year over year. Quarterly adjusted operating loss was $70
million, down 34.1% year over year. Adjusted operating margin was
a negative 21.1% compared with a negative 30.1% in the year-ago
quarter.
Future outlook
For the fourth quarter of 2012, Nokia expects its Devices
& Services operating margin to be approximately negative 6%,
plus or minus 4%. However, Nokia Siemens Networks segment
operating margin is expected to improve in the fourth quarter.
Nokia further expects to reduce the operating expense in this
segment by more than €1 billion by 2013 from the 2010 level of
€5.35 billion.
Recommendation
Nokia is nowhere near to gain market share from
Apple Inc.
's (
AAPL
) iPhone or
Google Inc.
(
GOOG
) developed Android-based smartphones. However, the stock price
plummeted more than 60% in the last year. We thus maintain our
long-term Neutral recommendation on Nokia. Currently, the company
has a Zacks#3 Rank, implying a short-term Hold rating on the
stock.
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