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Turnaround time
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Helsinki, Jan. 12 (Reuters): Nokia’s stronger-than-expected quarterly results mean the mobile phone maker now has breathing space and better options to help it claw back a place alongside Samsung and Apple in the smartphone market.
The Finnish handset maker, whose fall from market leader to loss leader was so bad its chief executive said two years ago it was on a “burning platform”, may even be in a position to list or sell its Nokia Siemens Networks (NSN) arm at a premium, instead of having to auction assets cheaply as had been feared.
Nokia’s improved performance also gives it time to carry on marketing the new Lumia handsets on which it is staking future smartphone success, which were launched in November and have recently gone on sale in crucial markets such as China and India.
“Reasonable Lumia volumes and much better margins and guidance in devices could reframe the debate on the long-term sustainability of the handset manufacturing business,” said Morgan Stanley analyst Francois Meunier.
NSN looks an attractive proposition both for public investors and private equity firms now that it is posting higher margins and profits on the back of cost cuts and improved sales of higher-margin network equipment gear to operators investing in faster 4G — fourth generation — wireless broadband.
NSN’s underlying margin was between 13 and 15 per cent in the third quarter, beating the forecast 8 per cent and helping Nokia trounce market expectations when it posted numbers on Thursday.
Cash from the sale or listing of NSN could then be ploughed back in to investment in Lumia.
Michael Schroder at Finnish investment group FIM and other analysts estimate the business to be worth well above 5 billion euros, although Nokia owns only half of it and could also choose to retain a stake in it.
“A listing could happen sooner than markets expect,” said Inderes analyst Mikael Rautanen, adding that he was surprised by the rapid turnaround at the unit which had been struggling to improve profitability. “Going back 6 months, no one would’ve believed it could have such good margins.”
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