Nokia Corporation (ADR) (NOK): A Quarter Which Didn’t Matter Much

Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) released earnings results that were about in line with expectations, and Bernstein analysts say there was nothing in those results that mattered much other than the reported tax benefit. However, they did tone down their previous view of the stock slightly from a positive to a more cautious view, only because shares appreciated after the earnings announcement.

Nokia Corporation (ADR) (NOK): A Quarter Which Didn’t Matter Much

Nokia posts strong results in Devices and Services

Analysts Pierre Ferragu, Jasmeet Chadha and Viral Gandhi note that Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) did surprise especially in Devices and Services. However, they say much of that surprise was handsets “forced through channels at very low margins” and falling average selling prices. They don’t yet see a turning point for Windows Phone in spite of the record number of Lumia handsets which were sold during the September quarter and say this doesn’t really matter for Nokia anymore anyway.

Other than IPR revenues, the division posted losses of around €100 million with operating margins of -17% in smartphones and 3.6% in feature phones. Nokia said that in the December quarter, this division’s earnings will move to the discontinued operations portion of its report ahead of Microsoft Corporation (NASDAQ:MSFT)’s planned acquisition of it early next year. As a result, the division will no longer have an impact on Nokia’s results.

Getting to the meat: NSN, HERE and IP

Nokia’s HERE mapping division reported better than expected profits in spite of lower than expected sales. Operating expenses were also lower, and the Bernstein analysts say because of this division’s size, it didn’t influence Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s overall results much.

Nokia Solutions Networks reported profits in line with expectations although margins were better than expected. Top-line, however, was below expectations. Operating margins are approaching what the analysts view as “normalized profitability” for Nokia.

They estimate that Intellectual Property brought Nokia about €140 million, which is in line with the €500 million annual run rate management had said.

Nokia sees tax benefit

Bernstein analysts said the only thing of interest in Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s report was the tax benefit because of the Microsoft transaction. The company will remain in a good tax position after that transaction closes. They modeled a €250 million one-off tax cost in connection with the divestment of the Devices and Services division and a 5% tax rate for Nokia going forward. They said Nokia has apparently accumulated enough tax credits to avoid taxes in Finland for a number of years under the new structure.