On Aug 14, 2014, we issued an updated research report on Nokia Corporation ( NOK). A significant number of contract wins coupled with aggressive 4GLTE network deployment across China has allowed Nokia to raise its operating guidance for fiscal 2014.
Nokia has delivered positive earnings surprises in all four quarters last year, with an average beat of 49.21%. Meanwhile, the company reported mixed financial results for the second quarter of fiscal 2014 with the bottom line surpassing the Zacks Consensus Estimate but the top line missing the same.
Recently, Nokia entered into a patent licensing deal with Wi-LAN. As per the agreement, the company’s Nokia Networks segment will acquire licenses to a major chunk of Wi-LAN’s wireless patent portfolio covering CDMA, WCDMA, GSM, HSPA and 4G LTE technologies. Also, Wi-LAN will take possession of a patent portfolio from Nokia. In an effort to accelerate its network deployment, Nokia has decided to buy SAC Wireless, a U.S.-based network installation services provider.
Moreover, aggressive deployment of 4GLTE network across China coupled with higher capital expenses related to network restructuring in India, Korea and Indonesia may create additional opportunities for the company. The company also received a major 4G LTE network upgrade contract worth nearly $416 million from EE, a leading U.K.-based wireless operator. Nokia has also struck a few major core virtualization deals with large carriers like Korea’s SK Telecom. Further, the company has won a major contract from VimpelCom Ltd. ( VIP), the third largest telecom operator in Russia.
Separately, Nokia had invested $100 million in the lucrative car connectivity service. The company also plans to enhance its HERE division to strengthen its foothold in the telematics service industry. Also, Nokia teamed up with Continental, an international automotive supplier, to offer connected car services to vehicle manufacturers.
Meanwhile, Moody’s upgraded Nokia’s corporate family rating to Ba2 from B1. In the meantime, Fitch Ratings has also raised Nokia’s debt rating to “BB” from “BB-“.
Nokia currently carries a Zacks Rank #3 (Hold).
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