On Friday, Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is scheduled to hold its first Capital Markets Day since it sold off the handset business. Investors and analysts will be focusing on growth in Nokia’s Networks business and looking for details on how management intends to more fully monetize the company’s intellectual property.
What to expect at Nokia’s CMD
Friday’s event will be the very first Capital Markets Day since CEO Rajeev Suri took the helm of the struggling Finnish company. It will also be the first one since Nokia unloaded its handset and devices business to Microsoft Corporation (NASDAQ:MSFT).
In their report dated Nov. 11, 2014, Jefferies analysts Lee Simpson and Robert Lamb said investors will be focusing on Nokia’s 2015 telco capital expenditures pipeline, especially in the U.S. They said investors will try to test the sustainability of the margins in the Networks business. Recently Nokia increased its margin guidance for the full 2014 fiscal year to at least 10% in the long term.
The Jefferies team also expects the new Technologies business CEO to outline their strategy to improve monetization of Nokia’s patents. However, they don’t expect any concrete numbers and note that the negotiations with Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) is still the biggest overhang on Nokia shares.
What Nokia management may say about Networks
In terms of the Networks business, the analysts want to hear management explain how they plan to “selectively” grow it through small cells, VoLTE, services or other methods. They also want to hear how Nokia will improve its cost efficiency in order to maintain the margins management has targeted.
The analysts also think management could offer some suggests about where they see their competitive edge in the radio business and how they will grow their Global Services segment. They point out that Nokia’s legacy contracts are mostly at an end, although the recent acquisition of SAC Wireless could help Nokia grow its U.S. business.
The Jefferies team maintained their Buy rating and €7.49 per share price target on Nokia heading into Friday’s event.
Nokia’s long term target could be increased
In a report dated Nov. 11, 2014, SEB Group analyst Artem Beletski said it’s possible that Nokia could actually increase its long term target of an EBIT margin of between 5% and 10% for the Networks business. The analyst notes that Nokia saw €1.5 billion in annualized cost reductions and that the Networks business led the industry in profitability. He calls the EBIT margin target “undemanding” and said he thinks Nokia could set a “more ambitious margin target” of greater than 10% for the new Nokia Networks, which is more efficient than it was previously.
He continues to rate Nokia as a Buy with a price target of €7.60 per share.