Tag Archive | "nokia"

Nokia Refutes Talk Of Microsoft Sale; Ticonderoga Likes It

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Shares of Microsoft (MSFT) have been under pressure this morning, and one thing appearing to contribute to downturn are rumors the company would step in to purchase Nokia (NOK) for $19 billion, according to remarks by Eldar Murtazin, a blogger widely credited with scooping Microsoft’s deal with Nokia earlier this year.

Murtazin’s blog appears not to have that claim today, but he is cited as stating such by Todd Haselton in a piece this morning on BoyGeniusReport.

A Nokia spokesperson, however, tells The Wall Street Journal’s Christopher Lawton a short while ago that, “These rumors are completely baseless.”

Murtazin has speculated as recently as May 16th that the two companies were talking about a deal.

Microsoft shares are down 54 cents, or 2%, at $24.47.  Nokia shares are down 34 cents, or almost 5%, at $6.68.

Well, at least one believer this morning is Brian White with Ticonderoga Securities, who follows Apple (AAPL) and has a Buy rating and a $612 price target on that stock.

“We believe reports from Boy Genius highlighting the potential for a Microsoft purchase of Nokia for $19 billion should provide Apple investors with even greater confidence that the company can continue to gain market share at the expense of legacy vendors in the mobile phone market,” writes White.

“In our view, Apple investors could not ask for a better deal, and we believe a transaction would only further Apple’s market share gains in the coming quarters.”

Sounds like White is choosing his words carefully, but it also sounds like he believes the rumor.

Article courtesy of Tech Trader Daily

RIM Off 6%: More Nokia Tea Leaves

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Shares of Research in Motion (RIMM) are taking it on the chin this morning, down $2.60, or 6%, at $40.25, as analysts continue to ponder the implications for the company following Nokia’s (NOK) reduced outlook yesterday.

As I wrote yesterday, some analysts see opportunity for RIM in Nokia’s flagging sales, but there’s also a concern Nokia’s turmoil at the hands of Android-based phones could be an omen for RIM as well.

For example, Jefferies & Co.’s Peter Misek today writes that average selling prices for the company’s wares could “collapse,” leading to an erosion of gross profit margin from 35% fiscal Q4 to 30% in the current quarter. And if operating profit on device sales falls to break-even, which he thinks it might, then the company’s profit would be dependent on subscription profits, which lag actual hardware sales.

Misek thinks Nokia’s deterioration highlights how difficult it is to transition operating systems — of particular concern to RIM as it moves from its “OS 7″ to the “QNX” operating system.

“We believe the transition from Blackberry OS to QNX will cause RIM to see the same pressures and challenges as Nokia is seeing, including ASP decline, margin erosion, and weakened carrier and consumer mindshare.”

Article courtesy of Tech Trader Daily

Nokia Continues Slide: Three Downgrades; Moto Death Spiral?

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Nokia (NOK) shares continue to fall this morning as the downgrades pour in following the company’s cut in its outlook yesterday.

I count three downgrades today, in all, from Goldman Sachs, Sanford Bernstein, and Canaccord Genuity.

As I wrote following that announcement, the bears warned that the worst may not yet be over in terms of the deterioration of the existing business, and that the partnership to develop phones with Microsoft (MSFT) still carries risk.

That’s generally the viewpoint of today’s actions as well. I’ll get to the Goldman and Bernstein notes in a moment.

Mike Walkley at Canaccord Genuity cut his rating to Hold from Buy and cut his price target to $8 from $11, writing that he is “increasingly concerned about sales for Nokia’s Symbian devices during the transition period.”

The vaunted Nokia distribution channel has in fact broken down in China, the company indicated, and the head of operations there has been let go. “Nokia indicated it had mismanaged inventory levels in China and has fired and replaced the head of its China distribution operations.”

Walkley cut his 2011 EPS estimate to $20 cents from 54 cents, and cut his 2012 EPS estimate to 28 cents from 83 cents, but he still thinks Nokia’s phones based on Windows Phone could become a viable third platform, after Apple’s (AAPL) iOS, and Google’s (GOOG) Android, and he models a profit of 83 cents in 2013, on a rebound in sales to €44.9 billion from a likely €39.7 billion in 2012.

Bernstein’s Pierre Ferragu, meanwhile, cut his rating from Market Perform to Underperform, with a $4 target price on the American Depository Receipts, down from $7.33 previously. His target price on Nokia’s ordinary shares goes to €3 from a prior €5.50.

Ferragu notes that he had upgraded the stock on March 11th, when there were 13 Sell ratings on the Street, thinking that investor expectations were low enough to offer some upside on the shares. But yesterday’s cut means the “worst case” scenario that he had imagined is, in fact, crystalizing.

The introduction of the Windows-based phone “will be challenging,” he thinks, “given the likely loss of traction and visibility of the Nokia brand, as well as the speed at which the opportunity for a third ecosystem to emerge is vanishing.”

In fact, Ferragu thinks something is happening to Nokia akin to what befell Motorola back when it lost its grip on the number two spot in the phone market:

This new guidance is to us a strong indication that the company is falling into the Motorola-type scenario we have been worried about for some time. We expect Nokia’s smartphone and mobile phone shipments to shrink sequentially in the second quarter, leading to market shares of 19% and 30%, down 19 pts and 5 pts year on year. This precipitous acceleration of market share loss has two major implications. Nokia is now losing visibility in Europe. The brand lost its first spot to Samsung in the first quarter and our recent store visits indicated a dramatic loss of visibility for Nokia: In some stores, we couldn’t see Nokia phones on display above knee level. Nokia’s emerging market share is not well protected. It now seems clear that Nokia’s more stable position in emerging markets and especially in China was artificial. Management advocated that major inventory build-ups artificially increased shipment volumes in the last quarters. We now believe Nokia will face pressure in these markets similar to what it has been experiencing in Europe.

Goldman’s Tim Boddy cut his rating to Neutral from Buy, writing that the company’s “rapid market share loss threatens Nokia’s distribution advantage.”

Boddy writes that his prior convocation that the stock offered upside if new Windows phones succeeded failed to anticipate how quickly the business would deteriorate.

“With Nokia unlikely to have a full Microsoft- based smartphone line-up across all price points before mid-2012, risks to revenues remain material, threatening Nokia’s ability to retain its distribution relationships and retail footprint when new products arrive.”

Boddy cut his EPs estimate for this year to 17 cents from a prior 53, and cut 2012′s estimate to a loss of 1 penny, versus a prior estimate of 70 cents per share.

And like Ferragu, he draws parallels with the old Motorola’s troubles when it lost its position in phones:

We believe the parallels between Nokia’s situation and Motorola in 2007/8 are becoming more similar. We still argue that Motorola’s position was more precarious, given its dependence on a slim number of high end ‘hit’ models for its profitability, a structurally unprofitable EM business and a weaker balance sheet, but a clear lesson from Motorola’s challenges (or, for that matter, Sony Ericsson’s) is that it is both difficult and time-consuming to rebuild distributor, retail and supplier confidence in your brand once market share has collapsed.

Things that were an advantage for Nokia, moreover, such as in-house manufacturing, may come to be a liability, Boddy believes. For one thing, of the company’s 59,000 employees in its handset operations, about half are based in developed markets. That might make it tough for the company to restructure if it wanted to shift resources to emerging markets where the upside is greater.

Article courtesy of Tech Trader Daily

RIM: RBC Sees Risk, Opportunity In Nokia Fall

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RBC Capital’s Mike Abramsky, who has a Sector Perform rating on shares of Research in Motion (RIMM), and a $53.45 price target, writes that the deterioration of Nokia‘s (NOK) business, expressed in Nokia’s financial update this morning, could present opportunity for RIM.

With 16% market share in Europe, RIM “has the opportunity to replicate the success that BBM [the BlackBerry messenger software] has had in the U.K.,” where RIM has the top spot in smartphones with 24% share.

Abramsky had downgraded RIM shares from Outperform back in April.

However, Nokia’s erosion could be an omen, too, of what happens to platforms that are “in transition”:

NOK’s warning, along with RIM’s Q1 warning, shows the risks investors face from handset vendors transitioning to new platforms. Just like carriers de-committing from Nokia’s legacy Symbian platform, carriers may be reluctant to maintain significant channel inventory of upcoming BlackBerry 7 devices which could result in more moderate interim sell-through ahead of next-generation QNX-based smartphones that are expected to launch in early 2012. The difference however is that RIM’s fan base appears more loyal to its core Blackberry experience (helping upgrade cycles) vs. Nokia’s base which has defected to HTC, Samsung (SSNLF), RIM, and Apple (AAPL).

Article courtesy of Tech Trader Daily

Nokia: Worse Before It Gets Better?

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More commentary is coming in as regards Nokia’s (NOK) cut in its outlook this morning, with bears warning that things will get worse before they get better. It’s not just the continued deterioration of the Symbian-based phones, but also some risk still in the company’s ability to make its partnership with Microsoft (MSFT) pay off:

Jennifer Fritzsche, Wells Fargo: Reiterates a Market Weight rating on Nokia, while cutting her range of possible stock values to $6.90 to $7.40, from a prior $9 to $10. “While NOK has continued to say that 2011 is a transition year, we believe today’s announcement highlights how quickly the shift is occurring in the competitive environment. While we believe the Windows phone could be a transitional even for NOK there is still much to prove, in our view and much integration risk that comes with such an event.” Fritzsche cut her estimate for this year to 21 cents from a prior 59 cents per share in earnings, and cut her 2012 outlook to 49 cents from 77 cents.

Alkesh Shah, Evercore Partners: Reiterates an Underweight rating and cuts his price target to $6 from $8, writing that the company is not yet in the “transition trough,” arguing that the stock is “not cheap at 28 times our fiscal 2012 EPS forecast,” or 18 times, when factoring in cash per share. Smartphones are going to be under pressure from low-end smartphones, while Nokia’s feature phones will face competition from “white box manufacturers.” Things may “worsen over the next few quarters,” shah thinks, and “consensus estimates may still not be low enough.” Shah lowered his own EPS estimate for this year to 22 cents from 48 cents, and cut his 2012 estimate from 61 cents to 25 cents.

Meantime, Nokia shares have rallied from the lowest point of the day, now down just $1.18, or 14.5%, at $7.01, versus an intraday trough of $6.79.

Article courtesy of Tech Trader Daily

Apple, Google Rise In Q1 Mobile Sales, Says Gartner

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Research firm Gartner this afternoon offers its latest update on the global mobile device market, citing an 19% rise in everything from the lowest-end phones to the smartphone.

Smartphones made up 23.6% of the market in Q1, says analyst Robert Cozza, and rose 85%, year over year, on volume of shipments. He believes some consumers may have held off on smartphone purchases as they observed the flurry of product announcements for things arriving after Q1.

Both Apple (AAPL) and Google stand out as the big winners in the survey, no surprise.

Among the vendors, Nokia (NOK) led shipment volume, of course, with 25% market share and 107.6 million units, although that was down from a 30.6% share a year earlier, when Nokia sold 110.1 million units.

Samsung (SSNLF) was second with 16%, down from 18%, LG Electronics (LGERF) was third with 5.6%, down from 7.6, and Apple was fourth, with 3.9% share, up from 2.3%, helping it to vault ahead of fifth place Research in Motion (RIMM), whose share held steady at 3%.

In smartphones, where Gartner ranks by platform, rather than hardware vendor, Google’s (GOOG) Android topped the charts with 36% of smartphone sales, almost quadrupling, year over year. Symbian, sold by Nokia and others, had 27% share, way down form 44%, and Apple’s iOS software platform rose slightly from 15.3% to 16.8%. Gartner reiterated a view that the partnership between Microsoft (MSFT) and Nokia will “accelerate Windows Phone’s momentum,” with the platform having only 3.6% share of smartphones in Q1, down from 6.8% a year earlier.

Article courtesy of Tech Trader Daily

Microsoft: Street Seeks Silver Lining In Skype Deal

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Microsoft (MSFT) shares are down 2 cents at $25.65 in early trading following yesterday’s 0.6% decline after the announcement the company will buy Internet calling firm Skype for $8.5 billion.

The day after stories, and the analyst notes seem largely to take a positive tone despite the sticker shock the Street experienced yesterday.

The Wall Street Journal’s Nick Wingfield writes this morning that Microsoft’s deal is a sign of the consumerization of technology, and makes passing reference to Cisco Systems’s (CSCO) failed effort with Flip video cameras. And Wingfield ends with a quote from Meg Whitman, who bought Skype when she was head of eBay (EBAY) in 2005. “Is Skype worth $8.5 billion? I don’t know, but it depends on how big the platform grows.” Wingfield notes that eBay will make a profit of about $1.4 billion on the deal.

Steve Lohr writes in The New York Times this morning, “by stitching Skype technology into Microsoft products, used by hundreds of millions of people, the software giant could hasten the mainstream adoption of video communications, especially in businesses.”

DealBook’s Evelyn Rusli writes that Microsoft settled on the $8.5 billion price in mid-April, after CFO Peter Klein travelled to private equity backer Silver Lake’s offices and the parties involved had discussions about valuation for several weeks.

A Reuters’s Breaking Views column by Richard Beales and Agnes Crane write this morning that, “the transaction is unlikely to pay off.” They note that past deals have floundered: the $6 billion purchase of aQuantive in 2007, “hasn’t borne any noticeable fruit in the battle with Google. Neither has the software giant’s search deal with Yahoo.”

Ann Winblad, a venture capitalist with Hummer Winblad, was on Bloomberg television last night, saying, “It’s the kind of bold move microsoft should be making … I think it’s a brilliant strategic move for Microsoft. It’s a chess move they need to remain competitive with Apple and Google, and it gives them an opportunity to partner further with Facebook, one of their core partners.”

And Bloomberg’s Dina Bass, Douglas MacMillan, and Joseph Galante this morning write that Skype refused to settle for less than $7 billion in its talks with Microsoft, citing anonymous sources.

The Financial Times’s Lex column writes that it’s all about Nokia: “If voice and video over the internet is going to become a big presence in mobile, it makes sense for Microsoft, desperate to differentiate its mobile operating system from Apple’s and Google’s, to buy the dominant brand. Will the network operators play along?”

And what of the analysts?

Walter Pritchard with Citigroup reiterates a Buy rating on Microsoft and a $35 price target. The deal “makes sense,” he thinks, and he lays out some possible “leverage”: the Kinect line becomes the “killer home video conference system / Win phone”; the business division, where it can integrate with Microsoft’s “Lync.” “Some of these integrations could potentially drive meaningful competitive advantage and augment existing Skype revenue that today is almost all based on calls to landline and mobile phones.”

Tavis McCourt with Morgan Keegan sees benefit to Nokia (NOK), Polycom (PLCM), Logitech (LOGI) and Plantronics (PLT) as “video and voice services will require more headsets and video bridging hardware. Nokia may benefit if Microsoft builds in any unique features not available on other handsets.” McCourt thinks Microsoft’s negotiations with telcos will become tougher as they view Skype as a threat, but, “Ultimately, we believe carriers will lose this battle.”

On that score, Craig Moffett with Sanford Bernstein this morning observes that Skype threatens the most valuable portion of the telco economy: basic connectivity. Voice service produces about $1 per megabyte in wireless services, whereas data service — Web browsing, etc. — commands only about 5 cents per megabyte. Undercutting that rich voice goldmine is an “arbitrage opportunity,” he writes, and tech companies love arbitrage. “Perhaps it was the threat of Facebook acquiring Skype that moved Microsoft to pay 10 times revenues,” writes Moffett. “Just don’t expect the carriers to be amused.”

Adam Holt with Morgan Stanley notes that while Microsoft has been developing unified communications with Lync and Xbox Live and Win Phone 7, Skype has 13 patents and over 400 patents pending “in areas from video delivery to data compression.” Moreover, though the valuation is rich, Skype’s metrics have been improving, the company is gaining more importance in social networking, and anyway, there are a lot more M&A deals being done in the $6 billion to $8 billion range, so what could Microsoft do? Use of foreign cash, he notes, is “found money.”

Article courtesy of Tech Trader Daily

MSFT: Skype A Use For Int’l Cash; Nokia Rises

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Responses are trickling in to Microsoft’s (MSFT) announcement this morning it will buy Internet phone calling firm Skype for $8.5 billion.

The conference call with Steve Ballmer and Skype executives starts in just a little bit, at 11 am, Eastern, so there’s likely to be more response later today after analysts’ have had a chance to ask some questions and digest the whole thing.

I would note that Nokia (NOK), Microsoft’s partner in smartphones, is beating the market this morning on no particular news, perhaps a reaction to Nokia’s now having another arrow in its quiver given its partnership with Microsoft for phone software. Nokia shares are up 20 cents, or 2.4%, at $8.61.

Sandeep Aggarwal with Caris & Co., who rates Microsoft stock a Buy, writing early this morning before the formal announcement, thinks “an acquisition of Skype by Microsoft makes sense, given how important “communication” and “mobile” are for Microsoft.” The $8.5 billion price tag implies a 25 times multiple of enterprise value to Ebitda, “which is somewhat rich.” It also would imply $2 per share in proceeds to eBay (EBAY), he calculates, given the latter’s 30% stake in Skype.

Aggarwal sees Microsoft working Skype into its “Lync” server for businesses and maybe putting it into Office. There’s lots of ways to enhance Windows Live for consumers and also add to its Windows Phone 7 operating system.

Collins Stewart analyst Kevin Buttigieg, who also has a Buy on Microsoft, this morning writes that this “isn’t the kind of transformative deal investors may have liked to see Microsoft do with $8.5 billion.”

“Skype is a large deal at a relatively expensive price that doesn’t transform any MSFT business quickly or in a way which improves perception about its ability to compete in a post-PC world.”

It will require “solid execution,” he writes, which is not something Microsoft is known for, he writes. The deal appears to be neutral to Microsoft’s non-GAAP EPS.

Is this a hidden plus? Buttigieg points out that as Skype is incorporated in Luxembourg, which means that Microsoft can use some of its international cash, which is 80% of its cash balance, for the deal.

Article courtesy of Tech Trader Daily

Nokia, RIMM: Wedge Sees Signs Of Hope

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Wedge Partners analyst Brian Blair this morning offers some hopeful, encouraging thoughts on both Nokia (NOK) and Research in Motion (RIMM) as the two pursue overhauls of their smartphone repertoire.

In the case of Nokia, Blair writes that his “checks” (he doesn’t specify, though I have a call in to his office to clarify) suggest that the company may introduce its first smartphones running Microsoft’s (MSFT) software sooner than expected. Blair thinks Nokia will host a “Nokia World” conference, which it does annually, sooner than usual. I’m not quite sure what he means, because he mentions a date of mid-October as being “earlier than usual,” when in fact Nokia World 2010 was in September of last year, in London.

In any event, Blair writes that the company’s “ahead of schedule in terms of development,” and he thinks the show could be used to debut Microsoft-powered handsets.

As for the big picture, “While we continue to feel the next three to four quarters will reflect the company’s transition away from the Symbian OS and show a marked drop in quarterly units for Nokia, we remain positive on the longer-term outlook for Nokia given the Microsoft partnership,” writes Blair. “It is our view that Nokia Window’s smartphones will become the fourth major player in the smartphone space, following [Google (GOOG)] Android, Apple’s (AAPL) iOS and RIM’s Blackberry OS.”

As for RIM, Blair was at the company’s “BlackBerry World” event in Orland, Florida this week and came away impressed with the “9900” version of the BlackBerry Bold that was introduced.

The device has a 1.2 GHz Qualcomm (QCOM) Snapdragon chip that is incredibly fast. The price of this chip is likely 2x that of Marvell’s however and is likely to create gross margin concerns. We moved through every application in our test and there was no lag, no hourglass icon telling us to wait, it was speedy in every way. Leaving Marvell [Technology Group] (MRVL) behind is good news for users. The company’s use of the term “liquid graphics” is legitimate. The transition between apps and opening apps and just generally navigating around the device is smooth in an iPhone-like manner.

Nokia shares today are down 9 cents, or 1%, at $8.52. RIM shares are up 71 cents, or 1.5%, at $48.08.

Article courtesy of Tech Trader Daily

Apple’s Share Of Smartphone Profits Can Go Higher, Says Canaccord

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Following reports last week Apple (AAPL) surpassed Research in Motion (RIMM) and Motorola Mobility (MMI) in U.S. cell phone sales, and has achieved 5% of global sales, for fourth place, Canaccord Genuity analyst Mike Walkley today writes that the company should be able to scoop up not only smartphone volume share in coming years but also a bigger slice of the profits.

Walkley reiterated a Buy recommendation on Apple shares and a $480 price target.

Walkley notes that Apple had second place in global smartphone sales in Q1, based on shipments of 18.7 million units, or almost 19% of the global smartphone volume, ahead of RIM, at 14.9%, and Samsung (SSNLF), at 12.6%, and behind Nokia (NOK), at 24%.

“We anticipate further declines [at Nokia] over the next several quarters as Nokia undergoes a platform transition,” writes Walkley, referring to the company’s drop from 34% of smartphone units last year, but also, more important, a drop in Nokia’s share of smartphone operating profit from 19% in Q4 of last year to 13% in Q1.

Apple’s share of profit rose from 43% in Q4 to 50% in Q1, putting it at the top of the heap. RIM’s share of operating profit was unchanged at 16%.

“Given’ RIM’s pre-announcement this past Thursday combined with our skepticism regarding QNX and RIM’s ability to launch competitive ‘super phones’ during 2012,” he writes, “we believe RIM’s value share will continue to fall during the next several years.”

Walkley doesn’t offer a specific target for how much Apple’s share may rise from the current 50%. However, he does project Apple’s global smartphone unit shipment share rising to 17.2% next year from what he projects will be 16.9% for the full-year 2011. That will bring Apple closer to what may be just 19.2% for Nokia by the end of 2012. RIM’s unit share of smartphones may decline to 12.7% by that time, he thinks.

Apple will be vying with growth at Samsung and HTC in smartphone units: Samsung may see its share rise from 13.9% this year to 15% next year, while HTC may jump from 11.6% this year to 12.9% in 2012.

Apple shares this afternoon are down $3.33, or 1%, at $346.80.

Article courtesy of Tech Trader Daily