Nokia X

Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) reported better than expected Q1 results on April 29. The Finnish company posted revenues of €2.66 billion ($3.68 billion). Now that Nokia has exited its handset business and has named a new CEO, the company is set for a new chapter. SEB Equity Research analyst Artem Beletski has raised the price target to €6.30, reflecting higher earnings expectations, especially from Networks business. SEB maintains its Buy rating on Nokia on attractive valuation, new deal potential in Technologies unit and improving growth in Networks.

Nokia SOTP

Nokia’s Networks unit to return to growth in 2H2014

Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s Networks unit posted a strong Q1 performance with 9.3% margin, beating the estimates of 5.5%. Solid Q1 earnings were mainly due to a relatively high 39.6% gross margin and higher software sales. Operating expenses at Networks came at €704 million, well below SEB’s estimate of €740 million. The research firm forecasts Networks margins of 8.6% in the current quarter. Though Networks revenues were down 17%, Nokia expects the unit to return to growth in the second half of this year.

Nokia Networks

Nokia no longer needs to worry about cross-licensing

Results from Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s Technologies unit were in line with the Wall Street consensus. Revenues rose 5%, supported by increased income from certain licensees. Nokia expects revenues from the Technologies segment to improve to €600 million this year, mainly due to higher revenues from Microsoft Corporation (NASDAQ:MSFT). Moreover, the Finnish company will now be able to negotiate better deals for patent licenses, that’s because the company won’t need cross-licensing after selling its devices business.

Nokia Technologies

HERE segment’s external revenues remain healthy

Meanwhile, HERE revenues of €209 million reflect a 3% YoY decline. Revenues were below the consensus of €218 million. However, SEB notes that the HERE segment’s external revenues continue to maintain a healthy growth, up 13% YoY. External revenues account for 89% of HERE’s total sales. Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) said that the company will invest in HERE this year for long-term growth.

HERE is focused on car industry and personal location services. Vehicle customers accounted for more than 50% of the unit’s total sales during the quarter. Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) said it’s one of the top two providers of location services that are independent from any operating system.

Nokia HERE

Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) shares fell 0.81% to $7.39 in pre-market trading Friday.

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