Nokia Corporation (ADR) (NOK) Expected To Report Weak Q2 Results

Nokia Corporation (ADR) (NOK) Expected To Report Weak Q2 Results
<a href="">Hermann</a> / Pixabay

Kepler Cheuvreux released a report on Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) wherein it stated that the Finnish company will post weak results in the second quarter, owing to negative news from Smartphone segment in the past few weeks. According to the report, the Q2 outlook is grim and the third quarter will also be cautious.

Nokia Corporation (ADR) (NOK) Expected To Report Weak Q2 Results

Smartphone market slowing

Earlier, Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) posted declining sales of its Galaxy S4 in the second quarter reflecting that the Smartphone market is now slowing. Other phone makers like BlackBerry and HTC were also amongst the companies who reported losses and lower margins, the reason being increased market spending and cost of components.

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Chinese vendors are giving tough competition to the Smartphone market in the emerging geographies in terms of volume. However, the report says that the smart device business will rebound (+2 percent YOY) fueled by a wide portfolio of products.

Nokia Siemens network and Devices and Services (D&S)

According to the Cheuvreux report, the D&S sales will decline 20 percent YOY in the second quarter (+11 percent QOQ) due to declining demand of the mobile phones (-35 YOY). The report further says that the D&S business will incur a loss in the second quarter due to higher operational expenditure.

Nokia Siemens network will be stable, but the sales will be down 4 percent in the second quarter, whereas clean operating margin will be around 5 percent (-200bp QOQ) as the geo-mix could deteriorate slightly.

In the third quarter, the results could be disappointing in D&S segment due to intense competition from the low priced Android phones in the quarters ahead.

Morgan Stanley estimates

Another analyst firm, Morgan Stanley (NYSE:MS) estimated that a total of 8 million Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) Lumia phones will be sold in the second quarter as against previous guidance of 7.1 million. For the fiscal 2013, total shipment of Lumia will be around 13.6 million compared to the previous estimate of 35 million.

According to Morgan Stanley, a  total of 55 million feature phones will be shipped in the second quarter, which will be similar to that in the first quarter. Samsung Rex Series will be a challenge for Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) in the second quarter, and there will be a decline in the shipment due to inventory depletion. For the fourth quarter, the feature phone shipment will increase to 68 million from 62 million in the third quarter.

Morgan Stanley further forecasted that operating margin will be 1.3 percent in Devices and Services segment and 7.5 percent on NSN.

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