($NOK) Nokia’s Earnings Surprise in Fourth Quarter

Nokia Corp. (NOK), the largest mobile phone manufacturer of the world, declared fourth quarter 2009 financial results, with net income up 60% year-over-year. This is primarily due to increasing market share in the high-end high-margin smartphone market coupled with effective cost-cutting measures taken by management. During the reported quarter, Nokia sold four new touch-screen smartphones in addition to its existing three touch-screen smartphones.

Quarterly net income was approximately $1,305 million or 37 cents per share compared to a net income of $816 million or 22 cents per share in the prior-year quarter. Fourth quarter EPS of 37 cents was significantly higher than the Zacks Consensus Estimate of 29 cents. Quarterly total revenue of approximately $17,740 million was a decrease of 5% year-over-year. However, fourth quarter revenue was well above the Zacks Consensus Estimate of $16,193 million. The decline in year-over-year revenue is the result of a huge reduction in net sales of the company’s struggling telecom infrastructure development segment of Nokia Siemens Network, which is a 50-50 joint venture between Nokia and Siemens AG (SI).

Quarterly operating profit was approximately $1,689 million, up by a massive 132% year-over-year. Operating margin in the same quarter rose to 9.5% compared to a mere 3.9% in the year-ago quarter. During fiscal 2009, Nokia eliminated 2,276 jobs or 1.8% of its total workforce that helped the company achieve this solid performance.

Operating cash flow in the fourth quarter 2009 was approximately $2,220 million, which is more than double sequentially. At the end of fiscal 2009, the company had around $13.17 billion of cash and marketable securities compared with $10.89 billion of cash and marketable securities at the end of the previous quarter. At December 31, 2009, Nokia’s net debt-equity ratio was –25%, compared to -14% at December 31, 2008.

Devices & Services Segment

Quarterly revenue was approximately $10.11 billion, up 0.5% year-over-year. This segment continues to generate the bulk (68%) of the total revenue. In the reported quarter, Average selling price (ASP) in the fourth quarter was around $93.2 compared to $105.8 in the year-ago quarter and $91.2 in the previous quarter. Gross margin was 34.3% compared to 33.8% in the same quarter of the previous year. Operating margin was15.4% compared to 12.1% in the year-ago quarter.

In the fourth quarter, Nokia shipped 126.9 million mobile handsets, up 12% year-over-year and also up 17% sequentially. In the same quarter, the company shipped 20.8 million smartphones, up 37.8% year-over-year. Nokia’s global market share in the overall mobile handset market was 39% in the fourth quarter 2009, compared to 37% in the year-ago quarter and 38% in the previous quarter. In the smartphone market, Nokia’s global market share was 40% in the reported quarter compared to 35% in the prior-year quarter. Nokia remains the market leader in Europe, Middle East & Africa and Asia-Pacific regions. However, the company lagged significantly behind both Research In Motion (RIMM) and Apple Inc (AAPL) in the lucrative North-American markets.

Nokia Siemens Network Segment

Quarterly revenue was approximately $5.33 billion, down 16% year-over-year. Gross margin was 30.6% compared to 30.4% in the same quarter of the previous year. Operating profit was around $25.2 million compared to an operating loss of around $265 million in the prior-year quarter.

NAVTEQ Segment

Quarterly revenue was approximately $333 million, up 10% year-over-year. Gross margin was 87.1% compared to 87.9% in the same quarter of the previous year. Operating loss was around $83 million compared to an operating loss of around $108 million in the prior-year quarter.

Future Outlook by Management

Nokia is expecting that its first quarter 2010 revenue for the Devices & Services segment will be within the range of approximately $9,522 million – $10,250 million. First quarter 2010 revenue for the Nokia Siemens Network is approximated within the range of $3,800 million – $4,250 million. For full fiscal 2010, the global mobile handset market would go up by 10%. Nokia is expecting to maintain its current market share for mobile handsets.

Zacks Investment Research

Comments

Powered by Facebook Comments


Similar Posts: | | | | | | | | | | Communication Equipment | Technology

RSS feeds: AAPL | American Strategic Income Portfolio Inc | Apple Inc. | ASP | NOK | Nokia Corporation | Research In Motion Limited | RIMM | SI | Siemens AG | Communication Equipment | Technology |

Other Posts by | RSS Feed for this author