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RF Micro Tips Nokia's Weak Hand

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Nokia (NYSE: NOK  ) reports earnings tomorrow morning. Today, RF Micro Devices (Nasdaq: RFMD  ) gave us a preview of how the handset giant's business is doing. It's not good news.

RF Micro counts Nokia as its largest customer by far. In last night's third-quarter report, total sales increased by 11% year-over-year but fell 2.4% from the previous quarter to land at $279 million. But if you take Nokia out of the equation, sales jumped more than 60% year-over-year.

Let that one sink in for a bit.

So it's clear from RF Micro's results that Nokia will report weak sales of its own tomorrow. Still the largest handset seller in the world by units, the Finnish giant is in decline as it loses market share in the all-important smartphone segment. Those are no longer the coattails you want to ride to riches, as RF Micro has learned the hard way.

CEO Bob Bruggeworth thinks the worst may be over, though: "These headwinds that we were facing at our largest customer are now subsiding, and we're going to be growing," he said. The second quarter of RF Micro's fiscal year 2012 is where he sees growth resuming "in any meaningful way at our largest customer," which translates to the September quarter.

Nokia is under new leadership with a chance to remake the business. However, the onslaught of Android and Apple (Nasdaq: AAPL  ) smartphones won't subside, Research In Motion (Nasdaq: RIMM  ) is still claiming its share of the enterprise-phone market, and Microsoft at least gets good reviews for its Windows Phone 7 handsets. A quick turnaround for Nokia seems out of the question, making RF Micro look smart for diversifying its business a bit.

Add RF Micro to your Foolish watchlist, and check back tomorrow for the real dirt on Nokia's results.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Microsoft is a Motley Fool Inside Value recommendation. Apple is a Motley Fool Stock Advisor pick. The Fool has written puts on Apple. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.

Read/Post Comments (3) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 26, 2011, at 1:29 PM, eFlatfooted wrote:

    Where is the frequent poster that likes to bash RIMM when there's a Fool Post on any smartphone manufacturer?

  • Report this Comment On January 27, 2011, at 11:54 AM, rfaramir wrote:


    "largest customer by far" does not tell us enough to gauge the effect on Nokia.

    If "largest customer by far" means, say, 50%, then +11% overall and +60% for non-Nokia means an atrocious performance by Nokia of -38%. But there are other possibilities:

    82% Nokia -> 0% growth (flat, +0)

    18% non-N -> 60% growth (+11)

    90% Nokia -> 6% growth (+5)

    10% non-N -> 60 % growth (+6)

    95% Nokia -> 8% growth (+8)

    5% non-N -> 60% growth (+3)

    You imply that Nokia is doing poorly, but "largest customer by far" is too little information to back this up.

    Disclaimer: I'm a satified iPhone user and Apple shareholder. I have no position in Nokia, but I do know one satisfied Nokia smartphone user.

  • Report this Comment On January 28, 2011, at 5:38 AM, TMFZahrim wrote:

    rfaramir, that's just publicly available information. Here's the lowdown on Nokia from RFMD's last 10K filing (April 2010):

    "Sales to our largest customer, Nokia, represented approximately 55% of our total revenue in fiscal 2010 as compared to 52% of our total revenue in fiscal 2009."

    As it turns out, Nokia's unit volume went down sequentially, which explains some of RFMD's pain.


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