MOT warning - implications for Nokia?
Will Nokia also warn - due to increasing handset pricing pressures around the world? Are the implications for Nokia as negative as shown by its Friday price drop? Or, could the implications be positive for Nokia?
MOT claims that its handset volume grew about 23% sequentially, from 53.7 million units to 66 million units. Their market share was about 53.7 million units out of about 250 million units in Q3, or about 21.5%. If they really picked up 1.5% of market share, the total Q4 market was about 287 million units, or a growth of 14.8%. If MOT just kept its same mkt. share, the market grew 23% also, to 307.5 million units. Who knows?
Assume a compromise number of a 300 million unit market - a sequential growth of 20%, with MOT market share then at 22%.
If NOK matches MOT Q4 growth of 23%, it sold about 108 million units. With a total market of 300 million, NOK's market share was 36%. If Nokia outgrew MOT in Q4 and sold 110 million units, its market share grew to 36.7%. If (lots of if's!) NOK kept its same margins as Q3, it should have earned about $.38 or $.39 at these volumes - versus the consensus of $.34. Per Eric's previous coverage of a Lehman's report, Lehman expects NOK to earn 0.33 Euros, or about $.40 for Q4. Nokia EPS for 9 months is up 29%. Extending that 29% to the 12 months, says that NOK should earn $1.28 for the year, or $.39 for Q4.
The expectations for Nokia are very low, so Q4 might give NOK the opportunity to shine, as they always seem to be at their very best for every Q4. An EPS of $.39 vs the consensus expectation of $.34 - especially in view of the MOT debacle - would do just that!!! Lehman has voiced its expectation that MOT's poor start to Q4 should be neutral for NOk, but positive for others. Eric voiced his feeling that it should be positive for NOK. We'll know in about two weeks.
By the way, Argus, in response to MOT's warning, revised it's EPS estimates down to $1.25 from $1.39 for 2006; to $1.38 from $1.53 for 2007. These compare with Argus' estimates for NOK of $1.24 for 2006; $1.57 for 2007. Yet they rate MOT as a buy, with a target price of $30; rate NOK as a hold. Analysts seemingly get big bucks for not being logical.
A resident optimist, Sisuman |
