Nokia Earnings Preview: What We’re Watching

by Trefis Team
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Nokia (NYSE:NOK) plans to announce its Q2 earnings on July 21st. Nokia has gone through one of the worst periods in the company’s history in the last quarter. A number of events have occurred recently from its Microsoft partnership agreement it announced in the last earnings call to its lower guidance for sales and profit margins due to competitive pressures. [1] In this earnings release we will look for updates in these areas. The company is getting squeezed from Apple’s (NASDAQ:AAPL) iPhone and Google’s (NASDAQ:GOOG) Android phones in the smartphone segment as well as in the low-end handsets segment for emerging markets, which historically has been its strength.

Our $9 price estimate for Nokia stock is about 60% above market price.

Updates & Outlook

We don’t expect Nokia to announce any major surprises during the upcoming earnings announcement; however, it will be interesting to see some updates on the transition from its Symbian operating system to Microsoft’s (NASDAQ:MSFT) Windows Phone 7 for smartphones. We will also look for more guidance on the product line-up that Nokia plans to have for the next few quarters.

The smartphone industry is quickly changing and companies need to constantly bring out new phones and features to remain competitive. Hence Nokia’s future line up will be key to retaining market share.

Among its recent products, Nokia launched a few promising phones in the last quarter including the N9, and it will be interesting to see whether the N9 made much of an impact on its quarterly earnings.

Successful Microsoft Transition Needed

During the last quarter’s earnings announcement, Nokia mentioned that transition to Microsoft smartphone platform will bring about product differentiation and large cost savings for the company. It indicated that the partnership with Microsoft is intended to reduce Nokia’s devices and services expenses by 1 billion Euros by 2013 from 5.65 billion Euros in 2010. ((Nokia Q1 2011 earnings conference call transcript, April 21st 2011)) Nokia also announced job cuts and hence it will be interesting to see if these initiatives have started to give any meaningful margins gains.

See our complete analysis for Nokia stock here

Notes:
  1. Nokia SEC Filing, SEC Online, May 31, 2011 []
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