The Zacks Analyst Blog Highlights: Nokia, Microsoft, Apple, Google and AT&T

CHICAGO, April 20, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Nokia Corp. (NYSE: NOK), Microsoft Corp. (Nasdaq: MSFT), Apple Inc. (Nasdaq: AAPL), Google Inc. (Nasdaq: GOOG) and AT&T Inc. (NYSE: T).

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Here are highlights from Thursday's Analyst Blog:

Nokia's Long Nightmare Continues

Nokia Corp. (NYSE: NOK) remains in dire straits. Today the company reported disappointing financial results for the first quarter of 2012, significantly below the Zacks Consensus Estimates. Currently, the company is in a transition phase for its legacy Symbian software-based mobile feature phones to Microsoft Corp. (Nasdaq: MSFT) developed Windows Phone 7 software based smartphones.

Quarterly net revenue was approximately $9,561 million, down 29% year over year and well below the Zacks Consensus Estimate of $10,053 million. Quarterly net loss was approximately $1,200 million or a loss of 33 cents per share compared with a net income of $300 million or 12 cents per share in the prior-year quarter. Adjusted (excluding special items) EPS of a loss of 11 cents in the reported quarter was significantly higher than the Zacks Consensus Estimate of a loss of 6 cents.

Nokia's Windows-based Lumia series of smartphones are nowhere near ready to grasp market share from Apple Inc.'s (Nasdaq: AAPL) iPhone or Google Inc. (Nasdaq: GOOG) developed Android-based smartphones. Recently, Nokia suffered a major blow when its much hyped Lumia 900 smartphone faced software glitch in the U.S. Lumia was Nokia's first 4G LTE-enabled smartphone. AT&T Inc. (NYSE: T) was its carrier partner.

On the other side, the company's low-end offerings are facing intense competition from low-cost touch screen phones, predominantly from Asian manufacturers.

Quarterly gross margin was 27.7% compared with 29.6% in the year-ago quarter. Operating loss, in the first quarter of 2012 was $1,742 million compared with an operating income of $571 million in the prior-year quarter.

Quarterly operating margin was a negative 18.2% compared with 4.2% in the year-ago quarter. At the end of the first quarter of 2012, the company had $6,334 million in net cash and marketable securities, down 24% year over year.

Devices & Services Segment

Quarterly total revenue was approximately $5,520 million, down 40.1% year over year. Within this segment, Smartdevices (including smartphones and tablets) revenue was $2,215 million, down 51.7% year over year. Mobile Phone revenue was $3,004 million, down 32.2% year over year. Other revenue was $301 million, up 52% year over year.

Smart devices average selling price (ASP) was $186 million, down 2% year over year. Mobile Phone ASP was $43, down 18% year over year. In the first quarter of 2012, Nokia shipped 11.9 million smart devices and 70.8 million Mobile Phones, down 51% and 16% year over year, respectively.

Nokia Siemens Network Segment

Quarterly revenue was approximately $3,831 million, down 7% year over year. Quarterly adjusted operating loss was approximately $191 million compared with operating income of $5 million in the prior-year quarter. Adjusted operating margin was a negative 5% compared with 0.1% in the prior-year quarter.

Location & Commerce Segment

Quarterly revenue was approximately $360 million, up 19% year over year. Quarterly adjusted operating profit was $47 million, compared with an operating loss of $21 million in the year-ago quarter.  Adjusted operating margin was 12.9%, compared with a negative operating margin of 6.9% in the year-ago quarter.

Future Outlook

For the second quarter of 2012, Nokia expects its Devices & Services operating margin to be similar to that of the first quarter of 2012 or may be negative 3%. Nokia further expects to reduce the operating expense in this segment by more than €1 billion by 2013 from the 2010 level of €5.35 billion.

Recommendation

We remain quite skeptical regarding the success of the Nokia-Microsoft mobile venture. We believe the company will face margin pressure throughout 2012 mainly due to a highly competitive industry dynamics.

We, therefore, retain our long-term Underperform recommendation on Nokia. Currently, Nokia has a Zacks #5 Rank, implying a short-term Strong Sell rating on the stock.

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