Foolish Forecast: Nokia Connects

Thursday morning brings a third-quarter report from Finnish mobile communicator Nokia (NYSE: NOK  ) . Grab some distilled, fermented barley and join me in the sauna. This report should be hot!

What Fools say:
The Motley Fool CAPS community is gushing over Nokia, with more than 1,030 ratings adding up to a four-star overall score. The last time an All-Star player shared a negative comment on this stock was more than a year ago, but top player jimmychen17 last week saw "great growth, great margin, hot market (handset market), and No. 1 market share," and backed it all up with some technical indicators.

Here's how Nokia's CAPS scoring rates against some of its peers and competitors, with a strong Scandinavian showing:

Market cap (billions)

CAPS rating

Bull ratio

Nokia

$141.2

****

91%

Apple (NASDAQ:AAPL)

$143.4

***

90%

QUALCOMM (NASDAQ:QCOM)

$70.0

***

90%

LM Ericsson (NASDAQ:ERIC)

$64.9

****

94%

Motorola (NYSE:MOT)

$43.9

**

81%

Data taken from Motley Fool CAPS on Oct. 15, 2007.

What management says:
Nokia expects to grow its global handset market share again, compared to last quarter, in a slightly expanded overall market. In a longer perspective, the company sees volumes climbing ever higher, but low-margin sales in emerging markets will start to bring down average selling prices.

What management does:
Predictable double-digit sales growth gets converted into improved net income in a typically efficient Nordic manner. That's despite thinner gross margins, highlighting both operational efficiency and strong economies of scale.

Margins

3/2006

6/2006

9/2006

12/2006

3/2007

6/2007

Gross

34.3%

33.7%

33.0%

32.5%

32.4%

31.9%

Operating

13.2%

13.9%

13.2%

13.0%

12.7%

13.8%

Net

10.5%

10.9%

10.3%

10.5%

10.2%

13.4%

FCF/Revenue

8.6%

9.2%

8.1%

9.3%

10.9%

11.6%

Y-O-Y Growth

3/2006

6/2006

9/2006

12/2006

3/2007

6/2007

Revenue

19.7%

19.3%

19.7%

20.3%

14.2%

16.3%

Earnings

13.8%

20.2%

12.8%

19.1%

11.5%

43.0%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
You might think that the success of Apple's iPhone and Research In Motion's (Nasdaq: RIMM  ) BlackBerry line would cut into Nokia's fortunes. Perhaps one day, but not yet.

The reasons are threefold. First, Nokia's smartphones are no slouches, so the company can compete for that market segment on its own. Second, the Finns are the worldwide handset leaders for a reason, having gone after a global market since the cell-phone revolution started. RIM and Apple just don't have the planetwide distribution network Nokia does.

And third, did I mention "economies of scale" yet? Rivals in the high-end gadget market are still toddlers next to an adult Nokia. Apple hasn't launched its phone anywhere except the U.S. yet, and while RIM's $4.2 billion in annual revenues sounds nice, Nokia pulled in more than four times that amount in the second quarter alone.

So those relative newcomers have some growing up to do. Nokia is still connecting people like nobody's business.


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Related Tickers

8/19/2014 4:01 PM
NOK $8.02 Up +0.20 +0.00%
Nokia CAPS Rating: **
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BBRY $9.85 Up +0.10 +0.00%
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