Nokia Corporation (ADR) (NOK) Q1 Will Not Yet Reflect Full Potential

Nokia Corporation (ADR) (NOK) Q1 Will Not Yet Reflect Full Potential
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Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s expectations in the first quarter is weaker than normal because the company is still in the middle of the geographic roll out of its new generation Lumia smartphones. In addition, the company continues to experience delivery problems for its flagship device, the Lumia 920.

Nokia Corporation (ADR) (NOK) Q1 Will Not Yet Reflect Full Potential

Analysts at Carnegie in Finland expect the company to ship 5.9 million smartphones including 4.9 million units of Lumia in the first quarter. The research firm recommended a buy rating for the shares Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V), but they emphasized their soft expectations for the company in the first quarter because of the above reasons. Its price target for the shares of the company is €4.50.

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Carnegie analysts, Matti Riikonen and Bruce Diesen expected that Nokia Corporation (NYSE:NOK)’s cash position by the end of 2012 declined from €4.4 billion to €4 billion due to increase in NWC and cash payments of approximately €350 million related to the company’s restructuring efforts.

On the other hand, Riikonen and Diesen explained that their positive conviction on Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is based on three reasons.

The first reason is the company’s exit from NSN. According to them, no matter what strategy the company applies to exit from NSN or its stake changes; it will reveal the stand-alone value of the business. They emphasized that NSN is a major contributor on Nokia’s SOTP valuation. The analysts estimated that Nokia’s 50 percent stake in NSN is around €8.6 billion, which represents €1.2 per share.

The second reason is based on their observation that new Nokia Corporation (NYSE:NOK) smartphones and Windows Phone 8 operating system continues to receive positive feedbacks in user polls including in the United States, which is a weak market for the company. According to them, the market share of the Windows Phone 8 is increasing steadily in all markets.

In addition, Riikonen and Diesen noted that many of the new generation Lumia smartphones are lower/mid price offerings, which are the fastest growing segments in the smartphone market. The analysts believe that Nokia Corporation (NYSE:NOK)’s volume growth will accelerate in the second quarter.

The third reason is based on their expectation that Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) would win its patent lawsuits against Android smartphone manufactures this year. The company has pending cases against HTC and Viewsonic. Riikonen and Diesen believe that HTC and Viewsonic would settle the case and license Nokia’s IPR.

T-Mobile USA recently announced that it would start selling Nokia’s Lumia 521 in May at an affordable price. The device will run on the carrier’s nationwide 4G network, and it will be available on its own retail chain as well as in Wal-Mart Stores, Inc. (NYSE:WMT) and Microsoft Corporation (NASDAQ:MSFT)’s retail stores.

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