Saturday, April 14, 2012

Estimates for Nokia 1Q2012

Update on 19-April

Results are now avialable at http://www.results.nokia.com/results/Nokia_results2012Q1e.pdf

I was close on the revenue, but way underestimated the loss. In particular NSN made bigger losses than I expected.


My estimate of Revenue: EUR 7.8B
Actual Revenue            : EUR 7.4B
My estiamte of Losses   : EUR 0.3B
Actual Losses               : EUR 1.5B


Original Post from 14-April

Just to make it clear in the beginning... Nokia reveals it’s 1Q 2012 earnings next Thursday (19-April-2012), and this is just an estimate based on recent announcements made by Nokia. Last week, Nokia lowered it’s outlook for it’s Devices & Services business in the first quarter of 2012.


What was stated
Nokia stated that in 1Q 2012
  • Operating margin was negative 3% for Devices & Services.
  • Net sales was 4.2 billion EUR.
  • Out of the above, Mobile Phone (i.e. feature phones) sales was 2.3 billion, while Smart Devices sales was 1.7 billion EUR.
  • Volumes were 71 million feature phones and 12 million smart phones.
  • Gross Margins was 25% overall, with 26% in Mobile Phones & 16% in Smart Devices.
  • Cash & liquid assets were 4.9 billion EUR.
Interpretation
Devices & Services forms the largest business unit in Nokia, followed by Nokia-Siemens Networks, and lastly, Location & Commerce. Nokia reports Devices & Services sales as the summation of the sales of the Smart Devices & Mobile Phones. In the last quarter, i.e. Q4 2011, Nokia sold 19.6 million smart phones. We know that this number has decreased to 12 million now. Similarly, in Q4 2011, Nokia sold 93.9 million feature phones, and this number has reduced to 71 million.


Devices & Services Q4 2011 Q1 2012 QoQ Change
Smart Devices Net Sales 2747 1700 -38.11%
Mobile Phones Net Sales 3040 2300 -24.34%
Other (Royalties, Microsoft Payments etc.) 210 200
Sales 5997 4200 -29.96%




Smart Devices Volumes (million) 19.6 12 -38.78%
Mobile Phones Volumes (million) 93.9 71 -24.39%
Volumes 113.5 83 -26.87%




Smart Devices Gross Profit 546.65 272 -50.24%
Mobile Phones Gross Profit 842.08 598 -28.99%
Gross Profit 1547.23 1050 -32.14%




Operating Profit 293.85 -126 -142.88%
Figures in miillion EUR
With these estimated results in devices & services, if I add the estimated sales & profits expected in Location & Commerce and Nokia-Siemens Networks, then it should give the full estimated Nokia P&L statement. Location & Commerce sales have been too small (range of 200~300 million) to impact the top line as much as the other divisions. Last quarter (Q4 2011) it impacted the bottom line due to a 1 billion EUR goodwill impairment (discussed in a previous post). The nature of this loss could be considered a one-time event, so I assume it has no impact on the profits as well. With Nokia-Siemens Networks (NSN), the sales have been declining at a rate of 4% QoQ in Q4 2011. Assuming this same rate continues, this division should generate about 3.6 to 3.7 billion EUR in revenue. NSN is expected to have an operating margin of -5%, or, in other words, a loss of about 183 million. So combining these, we get the expected Nokia Q1 2012 results below (figures in millions).



Full Nokia Q1 2012
Sales 7860
Net Profit -309
Device Volumes 83

Assuming no other source of profits (for e.g. royalty payments, Microsoft payments etc.), it seems like Nokia will make a loss of about 300 million EUR this quarter.

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