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