Nokia Tops on Q4 Earnings, Misses Revs

Zacks

Nokia Corp. (NOK) reported its fourth quarter 2014 results where both its top and bottom line surpassed the Zacks Consensus Estimate.

Quarterly net income was approximately $248 million or 6 cents per share compared with a net income of $402.4 million or 8 cents per share in the prior-year quarter. However, quarterly adjusted (excluding special items) earnings per share of 10 cents were better than the Zacks Consensus Estimate of 6 cents. On the other hand, quarterly net revenue was approximately $4,710 million, a stiff year-over-year fall of 21% and well below the Zacks Consensus Estimate of $6,978 million.  

Quarterly adjusted gross margin was 42.5% compared with 41% in the prior-year quarter. Adjusted operating margin, in the reported quarter, was 11.7% as against 15.2% in the year-ago quarter. At the end of the fourth quarter of 2013, Nokia had approximately $3,128.7 million of cash and marketable securities compared with $5,907.8 million at the end of 2012.  

Nokia Solutions and Networks Segment

Quarterly total revenue was approximately $4,207.3 million, down 22% year over year. Quarterly adjusted operating profit was approximately $472.9 million, down 39% year over year. However, adjusted operating margin was 7.8% compared with 6.3% in the prior-year quarter.

HERE Segment

Quarterly total revenue was approximately $344.2 million, down 9% year over year. Quarterly adjusted operating profit was $33.9 million compared with $54.2 million in the prior-year quarter. Adjusted operating margin was 7.1% compared with a negative 20.1% in the year-ago quarter.

Advanced Technology Segment

Quarterly total revenue was approximately $164 million, down 20% year over year. Quarterly adjusted operating profit was approximately $111.1 million, down 18% year over year. However, adjusted operating margin was 67.8% compared with 66.2% in the prior-year quarter.

Outlook

For fiscal 2014, adjusted operating margin for the Nokia Solutions and Networks segment will be in the higher-end range of 5% to 10% while for the first quarter of 2014 the segment is expected to be in the range of 5% plus or minus 4%.

Our Take

Stiff competition from Apple Inc.’s (AAPL) iPhones and Google Inc’s (GOOG) Android-based smartphones have forced Nokia to sell its Device business to Microsoft Corp. (MSFT) for $7.2 billion. The deal is expected to close by the end of the first quarter of 2014. As a result, Nokia has reported its handset business as discontinued operation in the fourth quarter of 2013.

Nokia currently has a Zacks Rank #2 (Buy).

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