We are upgrading our recommendation on
) to Outperform based on the company's fourth quarter of 2012
financial results, which significantly outpaced the Zacks
Why the Upgrade
Nokia's flagship Lumia series of smartphones received
reasonable market traction in the lucrative North American
region. Further, its mid-range Asha series of full touchscreen
phones also performed well in the emerging Asia-Pacific
During the quarter, the company also improved its margins and
cash position. A strong balance sheet with nearly $6 billion of
net cash and a powerful patent portfolio will sustain the
company's long-term R&D activities. Moreover, Nokia Siemens
Networks joint venture has shown signs of a turnaround. Nokia
currently has a Zacks Rank #2 (Buy).
) combination may become a formidable challenger to Apple's iOS
and Google's Android. Nokia is utilizing its expertise on
hardware design and language support to innovate the Windows
Phone 7 platform in areas like imaging.
Microsoft will pay $1 billion to Nokia over a period of 5
years for the promotional expenses of Windows-based smartphones.
This will not only mitigate the marketing expenses of Nokia but
also have a positive impact on the company's financials in the
years to come.
Nokia has decided to lay off nearly 10,000 employees by the
end of 2013.The cost-cutting measures will result into $1.26
billion of restructuring charges. However, the company will be
able to save approximately $3 billion per annum in its core
Devices & Services segment.
In addition, Nokia-Siemens Networks has decided to reduce its
headcount by 17,000, which is expected to result in an annual
cost reduction of approximately $1.35 billion by 2013.
Divestitures of non-lucrative segments, such as microwave
transport and fixed-line broadband access businesses helped the
company to concentrate on its core business of wireless and
Other Stocks to Consider
Other stocks to consider in the mobile handset market are
Research In Motion Ltd.
). While net earnings of Apple just managed to beat the Zacks
Consensus Estimate in the most recent quarter, Research In Motion
and Google both handily beat the Zacks Consensus Estimate. All
these three stocks currently have a Zacks Rank #3 (Hold).
APPLE INC (AAPL): Free Stock Analysis Report
GOOGLE INC-CL A (GOOG): Free Stock Analysis
MICROSOFT CORP (MSFT): Free Stock Analysis
NOKIA CP-ADR A (NOK): Free Stock Analysis
RESEARCH IN MOT (RIMM): Free Stock Analysis
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