Nokia Corp. ( NOK ) has delivered relatively better results during this quarter mainly driven by the increased sales of dual-sim handsets in the emerging markets. Both the top and bottom line surpassed the Zacks Consensus Estimates. Moreover, Nokia expected to regain its lost market share with the launch of its much-hyped Window-based smartphones. Windows Phone operating system is developed by Microsoft Corp. ( MSFT ).
However, delay in the launch of these phones in U.S. markets may affect revenue growth. We remain skeptical about these products as the success of any smartphone depends on several factors, including powerful operating system, strong hardware, easy application development interface, and carrier subsidy.
Meanwhile, the stock price plummeted 48% last year. This low-level of valuation may provide a cushion for further downslide. We, therefore, reiterate our Neutral recommendation on Nokia.
On October 26, 2011, Nokia finally launched its much hyped smartphones, Lumia 800 and Lumia 710, which are based on Window 7.5-based Mango software. With the holiday season ahead, we expect more such handsets to be released by the company, which in turn, will help Nokia gain market share.
Moreover, Nokia's management has also hinted that its next-generation tablets based on upcoming Windows 8 software is expected to be released by June 2012, which we believe is another positive catalyst for the company going forward.
Nokia provided relatively better financial outlook for the ensuing fourth quarter of 2011, mainly due to the popularity of the dual-sim handsets and the launch of Window Phone 7-based handsets. The company expects an adjusted operating margin of 1% to 5% in its core Devices & Services segment. Moreover, management expects to reduce operating expenses of this segment by Euro 1 billion during fiscal 2013.
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