For Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s third quarter earnings report card, Morgan Stanley analysts (Francois A Meunier, Andrew Humphrey, Hannah S Harrison) believe investors should look forward to cash burn in Devices and Services and fourth quarter cash burn guidance from the handset maker.

Nokia

Nokia Q3 estimates

Analysts expect Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) to ship 7 million units of Lumia smartphones in the third quarter, which is less by 5 percent quarter on quarter totaling  28 million in the financial year 2013. Feature phone shipment is expected to come in at 60 million in the third quarter, which is a surge of 12 percent quarter on quarter. Analysts are looking forward to an increase in feature phone shipments to 62 million in the fourth quarter and approximately 231 million units in the financial year 2013.

In devices and services segment, revenue is forecasted at €3.0 billion, an increase of 9 percent year on year compared to the guidance of an increase over the second quarter €2.7 billion. For Nokia Siemens Network (NSN) analysts are expecting revenue to be around €3.2 billion, a decline of 10 percent year on year and increase of 13 percent quarter on quarter.

Analysts expect operating margins to come in at -1.5 percent for Devices and Services compared to the guidance of -2 percent (+/- 4 percentage points). Margin for NSN is expected to be 9.5 percent versus guidance of 7 percent (+/-4 percentage points).

Assuming the Finnish firm concludes the deal, then according to the analysts, adjusted net cash flow would have come in at €7.4 billion by early 2014, “even assuming ~€400m additional cash burn in Devices we estimate before the deal closes and €400 million additional cash burn in Devices we estimate before the deal closes.”

Items to watch for

According to analysts, investors should watch for comments on potential consolidation in the sector, statement about the potential use of cash as Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) has come up with various ways to use the cash, company’s guidance for the fourth quarter and more details on the selling of the Devices & Services business to Microsoft.

Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) will provide information on its patent income and bullish investors are awaiting a strong performance, but analysts are cautious. According to analysts, they will be closely watching any development of margins in NSN, which will help in determining NSN’s ability to remain scale player in its current form.

Nokia will announce the results on October 29 at 11:00 am GMT/12:00pm CET/ 6:00am EST.