Nokia Corporation (ADR) (NOK) Downgraded By Swedbank
August 30, 2013
By Aman Jain
valuewalk.com
Nokia Corporation ( NYSE:NOK) ( BIT:NOK1V) (HEL:NOK1V) may continue its cost cutting efforts due to the recent acquisition of Nokia Siemens network (NSN) and “revenue erosion in Devices,” says a report from Swedbank by analyst Håkan Wranne.
Owing to these reasons, analysts have downgraded the Finnish phone maker to “Neutral” with a price target of EUR 2.50 from EUR 3, earlier.
Nokia lacks a “sub-USD 100 smartphone
Analysts point out that despite the fact that the “sub-USD 100 smartphone market is exploding,” Nokia has failed to deliver a single new product in the segment. Analysts believe that Nokia should “immediately” address the problem to avoid heavy losses.
Nokia Corporation ( NYSE:NOK) ( BIT:NOK1V) (HEL:NOK1V) is facing acute loss in volumes and average selling price (ASP) in its Mobile’s phone business at an increasing rate than was previously expected, as the market is dominated by the low cost phones Nokia lacks.
Nokia’s Lumia 520, which is priced at around $170, is the cheapest smartphone from the company, which implies that Nokia has no under $100 offering in the rapidly growing segment. Either Nokia should come up with a low cost phone, or it will have to restart its cost cutting measures soon.
NSN margins may be pressurized
Nokia Siemens network has been profitable due to cost cutting measures, which in turn is affecting the revenues. Analysts expect NSN’s most important customer, Softbank, to substantially bring down capital expenditure, which will affect margins, and revenue will again come under pressure. This might force the Finnish firm to go for another round of cost cutting.
Patents’ value may have peaked
According to analyst, SOTP is largely affected by two things; the mobile device business is considerably losing out on its value due to the decreasing footprint and value of IPR, which is significantly lagging behind the competitors who were hoarding the IPRs to gain a strong IPR footing. Swedbank analysts talk about a risk “that the trading value of patents may have peaked, as most major players have now acquired portfolios.”
Estimates lowered for 2014, 2015
Swedbank analysts have lowered top line estimates for fiscal 2014 and 2015 by 5 percent each, and EBIT margin from 6 percent to 4 percent for 2014, and in the range of 7 percent to 6 percent for 2015. Analyst has significantly lowered the estimates for mobile phones. Device and services operational expenditure is assumed to be below EUR 3 billion.
Nokia Corporation ( NYSE:NOK) ( BIT:NOK1V) (HEL:NOK1V), which was once the top-most player in the mobile segment, has been beaten down by iPhone and is limited to a percentage of the market share now. Nokia Corporation ( NYSE:NOK) ( BIT:NOK1V) (HEL:NOK1V) could not achieve substantially with Windows 8 phones as the devices still lack popular apps like Instagram, amongst many others. |
