Heavily shorted Nokia suspends dividend, lowers guidance–anybody surprised shares are down?
Investors weren’t happy to be reminded of how long a slog Nokia (NOK) still faces. The company reported earnings of 0.06 euros this morning, before the open in New York. That was a euro cent above Wall Street estimates. Revenue fell 19.6% from the fourth quarter of 2011 to 8.04 billion euros. That was just below the consensus of 8.06 billion euros.
The big news, however was that the company was suspending its dividend for 2013 in order to conserve cash. (Dividends in 2012 came to 20 euro cents a share.) In the quarter Nokia’s cash position improved by 800 million euros to 4.36 billion euros on December 31.
Yes, indeed management thinks the company has a tremendous amount of work ahead of it.
In the quarter the company managed to scratch out a very tiny positive operating margin in its device business of 1.3% (if you include one-time royalty income. Otherwise the device business broke even.) In the fourth quarter Nokia shipped 15.9 million smart phones with 4.4 million of those being the company’s new Lumia phones, 2.2 million being Symbian legacy phones, and 9.3 million being low-priced Asha feature phones.
The biggest problem for Nokia remains its lack of traction in the U.S. market. The company sold 700,000 phones in North America during the fourth quarter (out of global sales of 4.4 million.) That was ahead of the 300,000 phones sold in North America in the third quarter, but lagged analyst hopes for sales of 1 million to 1.2 million. (For context Apple’s (AAPL) global shipments of iPhones totaled 47.8 million in the fourth quarter.)
What to do with your shares now?
Nokia was heavily shorted going into today’s quarterly earnings announcement. (The shares were down 7.76% as of 2 p.m. in New York.) The company’s very positive January 10 preannouncement set up the actual earnings release to be a disappointment, especially because the company also lowered guidance for the first quarter of 2013. (I expect many of the shorts to cover in the next few days so if you’re looking to sell you might want to wait a bit.)
If you’re swing trading this stock, I’d wait to see if it might pull back further as analysts work that lowered guidance into their estimates for the first quarter. And then I’d wait some more for the company to actually report a fairly gruesome first quarter. Nokia has told investors that it expects operating margins in the first quarter for its device business of between +2% and -6%. Cash burn in the quarter is likely to be enough to raise fears again about whether the company might run out of cash.
If you are just holding the stock, patiently, for Nokia’s long-term recovery, I think your patience is going to be tried over the next few months. The stock was up 77% from November 8 through the January 23 close and it would only be reasonable to expect the shares to give some of that back in the next couple of months. I still expect Nokia to reach my target price of $7.80 a share but the shares won’t reach it without a pullback and consolidation—especially with the company’s guidance for the first quarter of 2013 as background. (Nokia is a member of my 12-18 month Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/, may or may not now own positions in any stock mentioned in this post. The fund did own shares of Nokia as of the end of September. For a full list of the stocks in the fund as of the end of September see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/
Nokia climbs strongly on China Mobile news
For the last few days all the important smartphone news has been about China.
On Friday, November 30, Apple confirmed educated speculation that the Wi-Fi versions of the iPad Mini and the fourth generation iPad will go on sale in China on December 7 and that the iPhone 5 itself will go on sale in China on December 14. This backs up a notice on a Chinese regulatory website that reported the approval of a “network access” license for a device that looked like the iPhone 5. China Telecom (CHA) and China Unicom (CHU) are expected to sell the phone. China Telecom chairman Wang Xiaochu said recently that he expected his company to get Apple’s phone by early December.
Today markets got confirmation that China Mobile (CHL), the third of China’s big three wireless companies, will start selling a model of Nokia’s new Lumia 920 that will be compatible with China’s homegrown TD-SCDMA wireless technology. (Bloomberg broke this story yesterday.) This would be a big deal for Nokia because Read more
Apple takes smartphone market share lead from Android phones
Apple (AAPL) leapfrogs ahead in the smartphone market share race again on the strength of iPhone 5 introductions. That provides the company with meaningful sales momentum as it heads into the critical end of the year selling period. But it also indicates how volatile this market is and how unlikely it is that any platform can stay at the very top of the market share pile for very long. (Apple is a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ )
In the 12 weeks that ended on October 28, Apple’s iPhone gathered 48.1% of the U.S. smartphone market, according to Kantar Worldpanel. That was a big leap from the company’s 22.4% share in the same period of 2011. And it edged Apple’s iPhones ahead of Android-based smartphones at the top of the smartphone heap. Market share for Android-based smartphones fell to 46.7% from 63.3%.
I expect to see market share re-shuffled a bit in the next reporting period since the 12 weeks to October 28 didn’t include results from the release of new BlackBerry phones from Research in Motion (RIMM) or from the launch of new smartphones from Nokia (NOK.)
But the smartphone market is clearly an Apple/Android horse race at this moment with the lead horse depending on which platform introduced new models most recently.
Right now that’s Apple—and the front of the pack is a good place to be as the field begins its turn into the end of the year home stretch. Apple has made a good recovery from its $525.62 November 15 closing low to close at $589.36 today, November 29, but I think this market share position indicates the stock has further to run as we head into 2013.
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , may or may not now own positions in any stock mentioned in this post. The fund owned shares of Apple as of the end of September. For a full list of the stocks in the fund as of the end of September see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/
Good news for Nokia, but it’s not clear how good
Not clear how “good” the good news really is, but certainly better than a poke in the eye with a sharp stick.
Nokia’s new Lumia 920 smartphone, a product that is supposed to begin the turnaround at the troubled cell phone maker, has sold out in Germany. It’s not clear from these reports, though, exactly how many phones German retailers had in stock. (In the U.S. many AT&T stores sold out on Lumia 920 launch weekend but many only began with 20 or so in stock.)
More meaningful is news that the phone has taken the #2 spot in Germany on Amazon.com’s list of top-selling mobile devices sold with contracts.
Nokia has always been a stronger brand in Europe than in the United States so good news on sales in Germany, Italy, and the United Kingdom doesn’t necessarily translate into good numbers in the home market of Windows Phone 8 operating system maker Microsoft. Early reports from Microsoft watchers say that the Windows 8 operating system for computers is running behind Microsoft’s sales targets but that Windows Phone 8 sales are running ahead of expectations.
Again, it’s hard to know exactly what this means without knowing what those expectations were. But considering disappointing sale for Nokia’s earlier Lumia 900 and fears that the 920 would go the same way, even this vague report is encouraging. In the United States AT&T (T) sells the Lumia 920 for $99.99 on a two-year contract. That’s cheaper than either Apple’s (AAPL) iPhone 5 or Samsung’s Galaxy SIII.
But then, considering that Nokia is trying to claw back market share, selling the phone at a lower price is an absolute necessity.
Shares of Nokia were up 6.14% as of the close today in New York.
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , may or may not now own positions in any stock mentioned in this post. The fund owned shares of Nokia as of the end of September. For a full list of the stocks in the fund as of the end of September see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/
Nokia’s really ugly third quarter numbers–and how I’d play the swing in this stock over the next three months or so
The numbers Nokia (NOK) reported yesterday morning, October 18, for its third quarter were so ugly that the big question is why the stock was down just 4.76% at the close in New York.
Of course, expectations were really, really low. Nokia reported a loss of 0.07 euros a share and that was still a positive surprise since analysts were looking for a loss of 0.10 euros per share. Revenue fell 19.4% year to year but revenue was still 3.9% above the Wall Street consensus.
But below the headline numbers, things went south rapidly. Nokia shipped 82.9 million phones in the quarter—that was down 1% from the previous quarter and down 22% for the third quarter of 2011. Smartphone unit sales fell by 38% from the previous quarter and 63% from the third quarter of 2011. Unit sales of Lumia models, key to Nokia’s attempt to regain some market share, fell to 2.9 million units from 4 million in the second quarter of 2012.
The truth is, though, that nothing this quarter matters much—except cash levels. Cash levels fell by 633 million euros in the quarter to 3.6 billion euros. That looks like it will be enough to get the company to 2014.
Which brings me to what does matter: Lumia sales in the fourth quarter when the first models of Nokia’s smartphones running the new Windows Phone 8 operating system go on sale. Nokia had expected that Lumia sales would drop in the third quarter as potential customers waited for the new models. The new Lumia 920 and 820 models are scheduled to hit store shelves in the next few weeks in the United States and Europe. How well will they sell? CEO Stephen Elop has essentially bet the company on the answer.
And investors don’t have much information for judging the likely answer to that question. The phones have been positively reviewed with praise for their look and feel, interface, camera, display, and proprietary Nokia apps. But investors don’t know if those qualities will be enough to make anyone buy the phone, and we won’t have even an inkling of a clue of a suspicion until the phones go on sale at AT&T on November 2 or 4. (The preorder date is either October 21 or October 29.) And we don’t know if Nokia will be able to supply enough phones to meet demand—should there be any, of course.
Right now treat this as a very speculative stock that’s best suited for trading Read more
