Nokia’s Cash Flow A Must Watch Item In Q3: Credit Suisse

Nokia’s Cash Flow A Must Watch Item In Q3: Credit Suisse
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Nokia’s Cash Flow A Must Watch Item In Q3: Credit Suisse

Forecasting on the results for the upcoming quarter for Nokia Corporation (NYSE:NOK), a report from Credit Suisse expects a quarterly decline of 12 percent and a yearly decline of 26 percent in sales to € 6.63 billion, along with an EPS of € 0.09. The report expects the Nokia’s new flagship smartphone, Lumia 920, based on Windows Phone 8, “to lag competition” from Apple Inc. (NASDAQ:AAPL)’s iPhone 5 and Samsung Electronics Co., Ltd. (LON:BC94)’s galaxy S3 in both software and hardware services. The plans from the handset maker to launch the new Lumia devices in selected markets suggests “that the move to WP8 presents another slow and challenging transformation as we estimate D&S losses of over € 700mn even in 2013. We reiterate our Underperform rating (TP of € 1.60)”.

Credit Suisse Group AG (NYSE:CS) expects the Finnish Handset maker to ship 78.6 million devices in the third quarter, which represents a 6 percent decline over the last quarter. Segment wise, Nokia Corporation (NYSE:NOK) is expected to ship around 3.1 million Symbian based devices, 2.2 million WP devices, and 71.3 million mobile phone units. Basing the estimates on these numbers, “expect operating loss of € 239mn (7.4% loss) vs. consensus at a loss of € 300mn (8.5% margin loss)”.

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For the second quarter, Lumia maker was able to generate € 102 million from cash from operations, which was mainly contributed by a €505 million gain from working capital, “positive € 470mn in D&S boosted by €€ 400mn of IPR pre-payments, positive €€ 135mn in NSN and negative € 100mn in L&C”. The report expects the company to spend a significant amount of cash in the second half of the year, and in 2013, as “the D&S revenues declining meaningfully in Q3 and thereby consuming cash, IPR payments already being pulled forward in Q2, limited room for continued WC improvements in NSN and increased cash restructuring in 2H12”. The spending will result in a decline of net cash from €4.2billion in the second quarter to € 3.8 billion by the end of 2012 and around € 3 billion by 2013.

Credit Suisse Group AG (NYSE:CS) expects the stock to fall further, due to the “likelihood of any potential break up is low over the next 12 months, we see further downside risk as the share price may track net cash/share, which we see heading down to € 0.75 by 2014 (vs.€ 1.1 in Q212)”.

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