Analysts at Bank of America Merrill Lynch (BAML) are cautious on Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s core business (D&S divisions) based on the latest data from their web analytics. According to them, the company’s momentum on its Asha devices may be declining in key markets.

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The analysts also cited that Windows Phones displayed moderate progress in Europe to date, but they see only a few signs of momentum for Windows Phones in the United States, which is a critical market. They “view sluggish uptake of Windows 8 as negative” for Windows Phones.

BAML analyst noted that the CFO of Siemens had been very vocal about the company’s plan to exit from its 50 percent stake in NSN by the end of 2013. The analysts opined that Siemens have three options to exit from their position including an initial public offering (IPO), spin out or sale to a third party including to Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V).

According to the analysts, a partial sale would be difficult for the Finnish smartphone manufacturer’s 50 percent stake in NSN because of its weak cash flow and balance sheet metrics. They believe Nokia Corporation (NYSE:NOK)’s management would choose an “all or nothing” approach. The company might sell its entire 50 percent stake or double down and buy a portion of Siemen’s stake in NSN.

The analyst said, “We view this as the most likely outcome as this would somewhat offset Nokia’s weak core business and allow greater access to NSN cash. For Nokia shareholders, we believe that the key share price driver will be the price of any NSN transaction (we value NSN at 0.4x EV/Sales or €5.4 bn for 100 percent stake).”

BAML analysts emphasized the consensus estimates for Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) for the first quarter is declining over the past month, with cuts in D&S revenues/EBIT outweighing small upgrades for NSN. The analysts said their D&S estimate is 6 percent below consensus on revenues and -4 percent on EBIT margin lower than the -2.1 percent consensus, and at the bottom end of guidance (-2 percent +/-2ppts).

The analysts said that they are 1.3 percent below group revenues and expects an adjusted EBIT of -€37 million (-6.0 percent margin) compared with the consensus expectation of profit of approximately €9 million/ 0.1 percent margin.

The analysts maintained their underperform rating and €1.90 price target for the shares of Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V).