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Nokia (NOK) Earnings and Revenues Decline Y/Y in Q1

Finland-based Nokia Corporation 's NOK first-quarter 2016 earnings per share (on an adjusted basis) of €0.03 (approximately 3 cents) were in line with the Zacks Consensus Estimate. This was the first quarter for Nokia post the acquisition of Alcatel-Lucent. In the year-ago quarter, Nokia had reported earnings of €0.05 (approximately 5 cents) per share.

Revenues declined 9% year over year (on a comparable combined company basis) to €5.6 billion (approximately $6.2 billion) but lagged the Zacks Consensus Estimate of $6.3 billion. Disappointing performance by the Nokia Networks division hurt the top line.

Quarterly adjusted gross margin was 39.4% in the reported quarter compared with 36.9% in the prior-year quarter. Operating margin improved to 6.2% from 4.5% in the first quarter of 2015. Nokia exited the first quarter of 2016 with net cash from operating activities of negative €1,583 million, compared with €460 million at the end of 2015.

Nokia Networks Segment

Total revenue was approximately €5,181 million (approximately $5,715 million), down 8% year over year (on a comparable combined company basis). At constant currency, segmental net sales were down 9%. Net sales declined in all regions apart from Latin America where growth was 6%. Net sales declined in North America (17%), Middle East & Africa (11%), Asia-Pacific (6%), Greater China (5%) and Europe (3%). Segmental gross margin contracted 340 basis points to 38.3% in the reported quarter. Quarterly adjusted operating margin came in at 6.5% compared with 3.7% a year ago.

The segment includes Ultra Broadband Networks and IP Networks and Applications. The 12% decline in the Ultra Broadband Networks sub-group to €3,729 million hurt segmental sales. Ultra Broadband Networks comprises Mobile Networks and Fixed Networks. Ultra Broadband Networks results suffered due to a 15% reduction in net sales of Mobile Networks to €3,116 million. Fixed Networks net sales climbed 13% to €613 million

Net sales in the IP Networks and Applications sub-group climbed 1% to €1,452 million driven by the 4% increase in net sales of IP/Optical Networks to €1,093 million. Net sales in the Applications & Analytics unit fell 7% to €359 million.

Nokia Technologies Segment

Quarterly total revenue came in at €198 million (approximately $218 million), down 27% year over year. Net sales decreased 28% at constant currency. Adjusted operating margin in the reported quarter fell to 53.5% from 65.2% a year ago.

Group Common and Other

Net sales climbed 16% to €236 million (approximately $260 million). The growth was driven by strong sales of Alcatel Submarine Networks. Segmental net sales increased 7% on a constant currency basis.

Outlook

The telecom giant, that officially took control of rival Alcatel-Lucent in Jan 2016, now expects to realize annual operating cost synergies of more than the previously stated €900 million from the Alcatel-Lucent deal in 2018. Capital expenditure for the company is projected at approximately €650 million for 2016.

The company expects net sales in its primary networks division to fall in 2016 due to a declining wireless infrastructure market among other headwinds. Segmental operating margin is forecasted above 7% for the year.

Zacks Rank & Key Picks

Nokia presently carries a Zacks Rank #3 (Hold). Investors interested in the broader Computer & Technology sector may consider BlackBerry Limited BBRY , KT Corp. KT and Medical Transcription Billing, Corp. MTBC . All the three stocks sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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