Trefis: Nokia Gets A Boost As Its Infrastructure JV Returns To Strength On LTE Wins
While the spotlight has been mainly on Nokia’s (NYSE:NOK) smartphone business of late as the company negotiates a tricky turnaround with its Windows Phone-based Lumia series, its oft-ignored telecom joint venture with Siemens seems to be finally turning the corner. Nokia Siemens Networks (NSN), the 50:50 JV between Nokia and Siemens, recently issued positive guidance for the fourth quarter 2012 announcing that its operating margins (non-IFRS) will exceed its previous guidance on the higher end by at least 100 basis points.
This continues the good show NSN has put on in recent quarters with a good number of LTE wins in the Asia-Pacific where Japan and Korea are driving a bulk of the LTE spend currently. What’s more, as the LTE transition continues in full swing, NSN has managed to snag a couple of important 4G deals with T-Mobile and U.S. Cellular in the U.S. as well – a region where NSN’s 4G prospects have been pretty dismal until recently.
That NSN’s improving financial condition has come on the back of its LTE leadership is also showing in its recent market share gains. As of Q3 2012, NSN had succeeded in increasing its market share to about 20% share of the wireless infrastructure industry, only 2% behind number 2 player, Huawei.  It now expects to reclaim its #2 spot behind Ericsson by the end of 2013.
What is even more reassuring about NSN’s future prospects is that this has come about even as the overall mobile broadband market has shrunk (11% y-o-y in Q3) due to tepid spending in an uncertain macro-economic environment. As carriers choose to allocate an increasing proportion of their tight CapEx budgets on 4G upgrades, the 4G LTE radio access network (RAN) market has almost tripled in size over the past year. This, coupled with NSN’s aggressive re-posturing as a mobile broadband specialist is helping it gain major ground in this transition period.
Sentiment: Strong Buy
Apart from revenue share gains, NSN is also benefiting from a major restructuring initiative which was announced in late 2011. As a part of the restructuring, NSN is aiming to cut around 17000 jobs and achieve a total of 1 billion Euros in savings by the end of 2013. Simultaneously, NSN is selling off non-core assets and increasing focus on wireless broadband which has strong long-term growth trends as opposed to the relatively stagnant landline market. As a result of the reshuffle, NSN has performed really well in 2012, returning to operating profitability in the last two quarters of the year – a big positive sign that the company’s cost-cutting initiatives are taking hold.
Consequently, the division has generated positive cash flows for four straight quarters now, and accounts for more than 35% of our $4.90 price estimate for Nokia’s stock. Our price estimate is about 6% ahead of the current market price.
With 4G LTE deployments ramping up in many parts of the world, NSN should continue to benefit from the 3G to 4G wireless shift in the coming years. The company has close to 70 LTE contracts globally and is focusing on key regions in North America, Japan and Korea where LTE is being laid out. Of particular interest to NSN in the coming quarters will be TD-LTE, a variant of 4G technology that is being used in many emerging markets such as China and India. NSN is the current TD-LTE market leader with five out of a total of 11 commercially deployed TD-LTE networks using NSN’s gear.  Both China’s and India’s biggest wireless operators, China Mobile and Bharti Airtel, have chosen NSN to deploy their respective LTE networks. With NSN’s future prospects looking brighter than ever before, Nokia will be banking on the division to generate cash and help it tide over the tough Windows Phone transition.
Sentiment: Strong Buy
I going to spend a little time here tonight to write some of my beliefs and deal with the abusing trolls that inhabit this board. This is a good point to do this after the abuse posting posted here in the last week or two in particular.
I appreciate the continuing info by so many good people here I am always impressed by the high level of information given to us here. I realize most people are wanting a perfect world with stocks. They want immediate or short term gratification. But this is a company that falls into a different group. It is a company in transition. It is working hard to capitalize on the so-called NSN deal. Fine, and it takes time and many people to get the job done. They deserve the time which they said they needed from the start.
Logically, NSN is going to be a busy and active major 4G network builder in the world. They are going to have big projects for years. Huge growing multiple millions of people are going to use mobile devices. NSN will ship off incrementally more orders to DRWI. All it takes is for DRWI to organize their operations to book profits. That is what executives do. It is a no brainer. Looks like an eventual winner profit making company, since they did it before. If there is really something wrong with that happening, it is the Board of Directors that has to figure out changes to get the job done. The Chairman of this company needs to step up and do the right things if it comes to it.
I am totally fine with the game plan here and will be patient. That is just me and I am a small investor here anyway. But in this case there are some obvious major investors, that give me additional confidence. That includes NSN owning stock. NSN didn't have to do a deal like this one, but they liked it and went with it. They are showing they know how to make profits too. I have to give that credit in staying with this stock.
I am glad to see many or most here ignore the greedy named posters that are paid to post trash and junk and insults day after day. In seeing their trail, they post the same loony nonsense at other boards. I originally thought that greedyone222 was a regular, normal poster, but his trail also shows he is off into weirdo land with the rest of the greedy posters doing the same or worse trash talk elsewhere. He harasses and insults people here like he does everywhere else at Yahoo. He is either out of his mind or paid to do this, or both. Take your pick. I know I will be immediately hit with vulgarity, with smears, and hate talk for speaking out against these abusers. I don't care. I resent who these people are and what they are doing to bash and badger and bully. There has already been a few occasions that as a lady I have been bashed. Still, I am speaking out for this board and for the rest of the good people here who seem to be just trying to be bystanders and ignore these trolls. We see in the news nut jobs and bullies and killers and insane walking among us here in America. Why should anyone of us here, that are good people, put up with these trolls that are in the same league as the others in society that are harming out country and citizens, including God bless those little kids.
Therefore, I urge all the good people here to shun and reject greedy posters and also greedyone222 who has left a trail of repulsive and childish and immature and despicable posts where ever you look, whether it is Ceragon, or that nut house of Ivan, or some others he hangs out at. He is and his gang of greedy trolls are not to be trusted or accepted by all here and everywhere at Yahoo so far as I am concerned. What they post is harmful to children and put our country into a horrible light. I particularly outrageous calling mothers names and also making fun of cancer. That is just not acceptable and essentially way out of bounds. I am totally shocked that Yahoo has not done away with these kinds of abusers. Maybe Yahoo will finally wake up and do something.
Even by saying this, these people are not chasing me away on my right to invest as I please and how I please or when I please. Nothing they can say will stop me from my freedom and even harm me in any way. I have already a long list of ignores on these trolls. I have sent in abuse reports. I hope that all of the good and normal and decent people here support me and will also join me in condemning these trolls, as well as blocking them out and keeping this board a normal place to post valid and fair opinions without troll harassment. I ask that others hit ignores and report abuse, as well as contact Yahoo by phone or letter or other means, to help put an end to these trolls.
As I say, there is not anything these abusers and in effect socio-pathetic people can do to deter me in my decisions about this company or anything. I am not afraid and I wish everyone else not be afraid or intimidated and stand up for yourselves and rights. Thanks to all of the good people here for being helpful and courteous as good Americans ought to be.