Nokia (NOK) reported first quarter earnings; the firm reported net sales of EUR 7.4 billion, compared with EUR 10.4B in the first quarter of 2011. EPS was -0.25. The operating loss was EUR 1.34B. Our high estimate was for sales of EUR 6.9 billion.
The decline in first quarter earnings compared to the year-ago quarter means the firm will have a higher price-to-sales multiple than at Wednesday's close. The price-to-sales multiple should contract to be closer to in-line with Research in Motion's or roughly 0.38. We could see Nokia trading in a P/S range of 0.25 - 0.5 range.
Sales at the firm are lower than they have been since at least 2008 as research & development spending has not translated into growing consumer demand for Nokia products. This is Nokia's fourth consecutive quarter reporting an operating loss. Operating income declined from EUR 1.5B in the first quarter of 2008.
The firm has failed to report an operating income in excess of EUR 1B since the fourth quarter of 2009. Nokia has faced a challenging competitive environment as the enterprise has lost market share to Samsung, Apple, HTC, and Research in Motion.
According to Nokia CEO, Stephen Elop, results of the sales of the Nokia Lumia have been mixed. Elop is continuing to focus on the low-end of the smartphone market and conserving cash. Nokia continues to "respond urgently."
With the firm forecasting second quarter operating losses wider than the first quarter's operating loss; Nokia may need to do more than respond urgently to regain market share from the iPhone, Samsung Android and BlackBerry. Nokia may need a miracle.