Richard Windsor with Nomura Securities in London says that despite Thursday morning’s “exceptionally good” results from Nokia, people need to pay more attention to the troubles in the Nokia-Siemens Networks business that supplies phone companies with radio equipment for their cellular networks. He says that a projected EUR1.5 billion in savings that is to be completed at the division by next year may not actually materialize because Nokia may have to give up ground on prices of its equipment to compete effectively with first-place equipment vendor LM Ericsson (ERIC).
The outlook for [Nokia Siemens Networks] is tough and we fear that at least 33% of the €1.5bn in targeted savings will have to be returned to customers to keep them from falling for Ericsson’s charms.
Windsor has a Neutral rating on shares of Nokia and believes the stock is fairly valued, even after raising his revenue estimate for this year way, way up, from EUR44.2 billion to EUR51.6 billion.
On the lighter side, American Technology Research’s Mark McKechnie says that despite the drag on profit from the losses at Nokia-Siemens, Nokia stands to gain market share in phones the rest of this year, and because of that he’s raising his price target on the stock to $42 from $38. He says that new phones introduced late in the current quarter will set up the company for market-share wins in the fourth quarter, as Nokia continues to enjoy a “1.5- to 2-year holiday while Motorola (MOT) regroups.” McKechnie thinks the Nokia-Siemens business is “near the bottom” of operating earnings, but doesn’t expect any dramatic improvement any time soon.