Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) has received upgrades from analysts at more than one firm, but Raymond James analysts have reiterated their Underperform rating on the stock. Most of those upgrades have come based on the deal between the Finnish company and Microsoft Corporation (NASDAQ:MSFT). However, Raymond James is basing its Underperform rating largely on impacts from currencies in emerging markets.

Nokia

Currencies weakening

Analysts Tavis C. McCourt and Daniel Toomey issued a research note to investors this week explaining why they remain at Underperform on Nokia. Their sum of the parts analysis hasn’t changed much, but they note that the currencies in a number of emerging markets where Nokia has a major presence have changed significantly.

The analysts specifically name the Indian rupee, the Indonesian rupiah and the Brazilian real as depreciating over the last two months. They said other emerging market currencies are also affected, some by more than 10 percent versus the euro. They believe that since most of the cost inputs into making handsets come in currencies that have stayed steady over this same time frame, the impact of currency devaluations in emerging markets will be significantly negative on Nokia.

Impacts on Nokia from emerging market currencies

The Raymond James analysts estimate that up to 46 percent of Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s mobile phone sales come from “markets or regions where currency weakness has been extreme.” They also estimate that about 30 percent of the revenue from Nokia Siemens Networks comes from areas with significantly weak currencies. However, they note that there are natural hedges like lower local labor costs associated with Nokia Siemens Networks which offset the problem of weak currencies in those markets.

Overall, they estimate that the recent currency moves would have about a 3 percent negative impact on Nokia and a negative €.13 per share impact on the company’s annualized non-IFRS earnings per share. The analysts believe that the company will feel the biggest pain from these currency weaknesses through either lower volumes or lower average selling prices or margins. They said it will all depend on the tactical decisions Nokia makes regarding prices.

They lowered their 2013 earnings per share estimate to €.08 from €.11 per share and their 2014 estimate to €.04 from €.12 per share based on effects from these currencies.

What about Nokia’s deal with Microsoft?

One thing that isn’t focused on in this note is the deal Nokia made with Microsoft Corporation (NASDAQ:MSFT), which is expected to close in the first quarter of next year. However, their Raymond James colleagues Michael Turits and James Wesman, who follow Microsoft, did provide analysis of it.

Under the deal, Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is selling most of its devices and services division, including a number of patents, although some patents the company will keep and license to Microsoft. Of course Microsoft’s purchase of the division highlights its commitment to devices and gives Nokia €3.79 billion for the devices business and patents.

Nokia also brings in €1.65 billion for the patent licensing part of the deal. In addition, Nokia CEO Stephen Elop returns to Microsoft to head up the company’s devices division, and there’s speculation that he’s in the running to be Steve Ballmer’s replacement.

Raymond James analysts estimate that the deal Is worth about .4 times Microsoft’s 2014 calendar year revenues, including patents, and .3 times excluding the patents. The company also gets 32,000 employees transferred from Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V).