Not the Prettiest, But Nokia (NOK) Edges Out Views in 'Transitional' Quarter

October 18, 2012 8:20 AM EDT
Nokia (NYSE: NOK) shares are higher in early trading Thursday following third-quarter results issued earlier.

To be sure, results weren't sterling. Revs fell from €8.98 billion last year down to €7.24 billion in the recent quarter. On a non-IFRS basis, Nokia reported a net loss of €0.07 per share, versus EPS of €0.03 reported for Q311.

Overall, the Street expected revs of €9.0 billion and a loss of €0.13 per share.

On a positive note, Devices & Services gross margin improved to negative 7.4 percent. Nokia Siemens Networks net sales increased quarter-on-quarter and year-on-year to €3.5 billion. Nokia also said its low-cost Asha smartphone line received positive response. Smart Devices average selling price (ASP) rose 18 percent while mobile phone ASP fell 3 percent overall.

Nokia also saw improved profit in its Location & Services segment, rising 32 percent from last year to €37 million despite a slow down in revs.

However, there were some speed bumps. Mobile Volume was 82.3 million units, from 106.6 million last year. Smart Device volume fell 63 percent to 6.3 million units.

Guidance was also a bit iffy. Nokia expects its non-IFRS Devices & Services operating margin in the fourth quarter 2012 to be approximately negative 6%, plus or minus four percentage points, meaning there will still be negative operating margin next quarter unless surprisingly robust Lumia sales take hold.

The following are some comments from CEO Stephen Elop on Nokia's conference call, held earlier:
  • The centerpoint of Q4 guidance is better than Q3;

  • New Lumia products will be a positive catalyst;

  • Sees operator demand for "Challenger" operating system;

  • Shipped 6.5 million Asha smartphones in Q3;

  • Nokia needs "critical mass" in Windows Phone system;

  • Nokia has a "strong, preferred" relationship with Microsoft (Nasdaq: MSFT);

  • The Lumia 820/920 are being tested globally; and

  • No guidance was issued for Lumia devices.
Nokia shares are up about 2.7 percent in early trading Thursday.

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