Nokia Corp. (NOK), the beleaguered mobile handset developer, has significantly outperformed the Zacks Consensus Estimates in the fourth quarter of 2012. The company improved its adjusted operating margin attributable to better sales of the flagship Lumia series of smartphones. Nokia currently has a Zacks Rank #1 (Strong Buy).
However, the company has given a weak financial outlook for the first quarter of 2013 due to increased competition. The Board of Directors has decided to propose suspension of annual dividend payment for the first time in over 20 years to ensure adequate liquidity.
Quarterly net revenue was approximately $10,614 million, down 20% year over year, surpassing the Zacks Consensus Estimate of $10,352 million. Quarterly net profit was approximately $267 million or 5 cents per share compared to a net loss of $1 billion or a loss of 38 cents per share in the prior-year quarter. However, quarterly adjusted (excluding special items) earnings per share of 8 cents were way ahead of the Zacks Consensus Estimate of a break-even result.
Adjusted operating profit in the reported quarter was $838 million, up 33% year over year. Quarterly adjusted operating margin was 7.9% compared to 4.8% in the year-ago quarter. During the fourth quarter, the company generated $743 million, down 11% year over year. At the end of fiscal 2012, Nokia had approximately $5,755 million of cash and cash equivalents compared with $13,641 million at the end of fiscal 2011.
Devices & Services Segment
Quarterly total revenue was approximately $5,087 million, down 36% year over year. Within this segment, Smartdevices (including smartphones and tablets) revenue was $1,617 million, down 55% year over year. Mobile Phone revenue was $3,258 million, down 19% year over year.
Other revenue was $213 million, down 20% year over year. Smartdevices average selling price (ASP) was $246, up 33% year over year. Mobile Phone ASP was $41, down 3% year over year.
In the fourth quarter of 2012, Nokia shipped 6.6 million Smartdevices (including 4.4 million Lumia-series phones and 2.2 million Symbian smartphones) and 79.6 million Mobile Phones (including 9.3 million Asha full touch phones), down 66% year over year and 15% year over year, respectively.
Nokia Siemens Network Segment
Quarterly net revenue was approximately $5,264 million, up 5% year over year. Quarterly adjusted operating profit was approximately $1,113 million, down 11% year over year. However, adjusted operating margin was 14.4% compared with 4.6% in the prior-year quarter.
Location & Commerce Segment
Quarterly net revenue was approximately $367 million, down 9% year over year. Quarterly adjusted gross margin was 82% compared with 77.8% in the year-ago quarter. Adjusted operating margin was 14.4% compared with 9.5% in the year-ago quarter.
For the first quarter of 2013, Nokia expects its Devices & Services operating margin to be approximately negative 2%, plus or minus 4%. However, Nokia Siemens Networks segment operating margin is expected to be 3%, plus or minus 4%. 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.
Other Stocks to Consider
Other stocks to consider in the mobile handset market are Apple Inc. (AAPL), Research In Motion Ltd. (RIMM) and Google Inc. (GOOG). While net earnings of Apple just managed to beat the Zacks Consensus Estimate in the most recent quarter, Research In Motion and Google both handily beat the Zacks Consensus Estimate. All these three stocks currently have a Zacks Rank #3 (Hold).