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Nokia (NOK): Growth Prospects Bright, Networks Unit a Drag

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On Dec 2, we issued an updated research report on Nokia Corporation (NOK - Free Report) . The company has witnessed remarkable revenue growth at the Nokia Technologies, Group Common and Other segments. Moreover, Nokia is actively working on improving its product portfolio.

Strategic Investments

We are positive on Nokia's acquisitions of Withings S.A. and Gainspeed. The company has also inking deals or pursuing acquisitions to drive growth. The company recently took over U.S.-based startup Eta Devices to improve base station energy efficiency. Also, the company has divested its HERE maps navigation unit to a consortium of German automakers. We believe that this decision to sell the unit will allow Nokia to focus on its core area of strength – the wireless-network business.

Opportunities

Aggressive deployment of 4GLTE network across China and the rest of the world coupled with higher capital expenses related to network restructuring in India, Korea and Indonesia may create additional opportunities for the company. Rising popularity of the Voice over LTE (VoLTE) and the Voice over Wi-Fi services may further propel growth for network upgrade in the forthcoming years. Also, we are optimistic about the company’s efforts to expand its product portfolio through the enhancement of its Mobile Edge Computing Application, launch of the Everything as a Service (Xaas) platform and expansion of the AirScale Radio Access Portfolio.

Potential Headwinds

We are concerned about the recent below-par performance of Nokia’s primary division – the Networks unit. The company does not expect its struggling unit to show any recovery this year. Nokia expects net sales at the division to continue to fall due to softness in the wireless infrastructure market, among other headwinds. Additionally, the company’s growth-through-acquisition strategy poses integration risks.

Nokia has a Zacks Rank #3 (Hold). Better-ranked stocks in this industry are Harris Corporation , Juniper Networks, Inc. (JNPR - Free Report) and Motorola Solutions, Inc. (MSI - Free Report) . All of them carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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