Nokia Corp. (NOK), the largest mobile phone manufacturer of the world, declared its fourth-quarter 2011 financial result where both the top and bottom line beats the Zacks Consensus Estimate.
Quarterly net revenue was approximately $13,496.7 million, down 21% year over year but was above the Zacks Consensus Estimate of $13,407 million. Quarterly net loss was approximately $1286.9 million or a loss of 39 cents per share compared with a net income of $1,192.5 million or 27 cents per share in the prior-year quarter. However, adjusted (excluding special items) EPS of 8 cents in the reported quarter beat the Zacks Consensus Estimate a couple of cents.
Quarterly adjusted operating income was approximately $644.8 million, down 56% year over year. Adjusted operating margin in the fourth quarter was 4.8% compared with 8.6% in the year-ago quarter. Operating cash flow in the reported quarter was $868.8 million, down 74% year over year.
At the end of the fourth quarter of 2011, the company had $7.52 billion in net cash and marketable securities compared with $9.43 billion at the end of fiscal 2010.
Devices & Services Segment
Quarterly revenue was approximately $8,090 million, down 29% year over year. Within this segment, smartdevices (including smartphones and tablets) revenue was $3,705.7 million, down 38% year over year. Mobile Phone revenue was $4,101 million, down 23% year over year. Smartdevices average selling price (ASP) was $188.9, down 9% year over year. Mobile Phone ASP was $43.2, down 24% year over year. In the fourth quarter of 2011, Nokia shipped 19.6 million smartdevices and 93.9 million Mobile Phones, down 31% and 1% year over year, respectively.
Nokia Siemens Network Segment
Quarterly revenue was approximately $5,146.4 million, up 15% year over year. Quarterly adjusted operating profit was approximately $237.4 million, up 21% from the prior-year quarter. Adjusted operating margin was 4.6% compared with 3.7% in the prior-year quarter.
Location & Commerce Segment
Quarterly revenue was approximately $412.8 million, down 4% year over year. Quarterly adjusted operating profit was $39.1 million, up 200% year over year. Adjusted operating margin was 9.5% compared with a negative operating margin of 10.9% in the year-ago quarter.
Future outlook
For the first quarter of 2012, Nokia expects to report break even operating margin for its non-IFRS Devices & Services, ranging approximately 2 percentage points. Nokia further expects to reduce the operating expense in this segment by more than €1 billion by 2013 from the 2010 level of €5.35 billion.
Recommendation
Continuous loss of market share coupled with stiff competition from Google Inc’s (GOOG) Android-based smartphones and Apple Inc’s (AAPL) iPhones are headwinds for the company. Furthermore, delay in the launch of Windows Phone 7 based smartphones may act as negative catalysts for the stock in 2011.
However, increased shipments of Nokia’s dual-sim handsets in the emerging nations as well as aggressive cost reduction steps implemented by the company are positives.
We maintain our long-term Neutral recommendation for Nokia. Currently, Nokia has a Zacks#4 Rank, implying a short-term Sell rating on the stock.
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