Nokia’s Better Future Lies With Asha Not Lumia: Nomura

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Nokia's Better Future Lies With Asha Not Lumia: Nomura

Nokia Corporation (NYSE:NOK) future immediate future lies with the Asha phones and not Lumia phones, according to a report by Nomura Equity research analysts. The Finnish-based smartphones and feature phones manufacturer has been hit hard since it started losing market share to rivals Apple Inc. (NASDAQ:AAPL) and Samsung Electronics Company Ltd, last year. Since the beginning of this year, the company has been reporting a string of losses, from one quarter to another.


The analysts are of the opinion that investors are likely to focus on the ailing phone maker’s future outlook, rather than, the company’s Q3 results. The analysts expect Nokia Corp. (NYSE:NOK) Q3 results to be weak, just as estimates suggest, and subsequently a muted Q4, which according to them offer no real promise to investors to retain the company’s stock, let alone, buying it.

According to Nomura’s analysts, Nokia Corporation (NYSE:NOK)’s future lies, not in the smartphone business unit, but in its feature phones, which they believe, stand a better chance of mounting a challenge to similar products from competitors. Categorically, Nomura’s equity research analysts have pinpointed Nokia Asha as a case example of the devices that can help in shaping up the future of the fallen giant.

Nokia’s smartphone business is labelled “risky”, as competition from Samsung, and Apple is considered almost unbeatable. Additionally, Nokia adopted the Windows Phone O.S. platform, which lacks market traction, and has, since its adoption, exhibited a lackluster performance. Furthermore, the analysts earmark that Nokia’s Symbian phones are quickly declining in sales units, as the market switches to Android, and iOS platforms. Interestingly, Nokia’s adopted Windows Phone holds less than 5% in market share.

Earnings Estimates

Nomura equity research analysts estimate that Nokia Corporation (NYSE:NOK) will report EUR 7.1 billion for Q3, which according to them is still a downside for the Lumia phone maker. Additionally, the analysts expect Nokia to continue applying its cost cutting measures, which should result in an estimated EBITDA of (loss) 3%. Nonetheless, the analysts are cautious on the estimate, and are citing volatility in revenues as a likely detractor to achieving this level.

Nokia’s Earnings per share value, is expected to improve significantly, as compared to Q2 figures, from a loss of EUR 0.38 per share to $0.18 in Q3. The guidance for Q4 is expected to return a loss of EUR 0.13 per share, with full year 2012 loss expected at EUR 0.93 per share, or EUR 3.459 billion in net loss. Nonetheless, Nokia Corporation (NYSE:NOK) is expected to report profits of EUR 113 million in 2013, which if sustainable, is expected to mark the return to profitability for the Scandinavian-based phone maker.

The company’s adjusted income for 2012 is expected to be a loss of EUR 1.388 billion, or EUR 0.37 per share loss., while 2013 will report EUR 635 million, or EUR 0.17 per share in profits.

Nomura analysts advise a cautious approach to the sector, with the exclusion of a few distinguished players like Ericsson and Cisco, which they have placed a Buy rating, along with the likes of Apple Inc. (NASDAQ:AAPL), despite the neutral rating, and Korea’s Samsung Electronics Co. Ltd.

Today, Nokia Corporation (NYSE:NOK) closed at a price of $2.94 per share, up $0.12, or a 4.08% increase from yesterday’s close. After hours, the stock was trading at $2.86 per share, down $0.08, or 2.56% decline from today’s close.

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