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Nokia reported a stronger than expected quarter yesterday with both revenues and margin performance exceeding analyst expectations. Rick Simonson, CFO, noted in the company's call with analysts:

In the first quarter net sales were up a very strong 29% year-over-year and were down an unusually light 8% sequentially. Gross margins were down sequentially 20 basis points to 33.9%. The decrease was driven by the sequential decline in networks gross margin which is predictable given the typical seasonal drop in net sales. Gross margins from global phones, multimedia, and enterprise solutions were all up sequentially...

The reported group operating margins were up 120 basis points sequentially, 14.4%. Excluding special items operating margins were 14.6%. The improvement in the margin was driven by mobile phones and multimedia, which had a combined operating margin including the special items of 18.5%. That’s up 190 basis points sequentially.

Operating expenses were down 140 basis points sequentially as a percentage of sales to 19.5%. So whether you look at the reported or the clean number, the OpEx decline was significant and more than one might expect during a typical first quarter.

Sell side analyst responses to the quarter were overall positive as reported on Newratings:

  • Goldman Sachs kept its In-line rating on the stock, but expects weaker gross margins and ASPs in Q2. EPS estimates for 2006 were increased 8% EUR1.13 and for 2007 were bumped up 10% to EUR1.22.
  • ABN Amro kept its Sell recommendation on the company, and increased the target price from EUR 14 to EUR 16.5. EPS estimates were increased to EUR1.04 from EUR0.88 for 06 and to EUR1.07 from EUR0.96 for 07.
  • WestLB upgraded Nokia from Sell to Hold, raising the price target to EUR19 from EUR13.7. 2006 EPS estimates were raised by 14% to EUR1.16.
  • HSBC maintained its neutral recommendation, but increased its target price to EUR19.5 from EUR15.35.
  • Credit Suisse maintained its outperform rating for the stock and EUR19 price target. Above consensus estimates were raised to EUR1.10-EUR1.15 from EUR1.05 for '06, and to EUR1.30-EUR1.35 from EUR1.20 for '07.
  • UBS maintained its Buy rating and upped the target price to EUR22 from EUR21. EPS estimates for 2006 were increased to EUR1.41 from EUR1.26, and for 2007 to EUR1.58 from EUR1.54.
  • Source: Analyst Responses to Nokia's Strong Quarter (NOK)