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Nokia Corp. ( NOK - Analyst Report ) , the beleaguered mobile handset developer, has managed to outperform the Zacks Consensus Estimates in the second quarter of 2012. Quarterly net revenue was approximately $9,689 million, down 19% year over year, surpassing the Zacks Consensus Estimate of $9,333 million.
Quarterly net loss was approximately $1,964 million or a loss of 49 cents per share compared with a net loss of $523 million or 10 cents per share in the prior-year quarter. However, quarterly adjusted (excluding special items) earnings per share of a loss of 10 cents were better than the Zacks Consensus Estimate of a loss of 11 cents.
Quarterly gross margin was 23.6% compared with 30.8% in the year-ago quarter. Operating loss in the reported quarter was $1,061 million, up 69.6% year over year. Quarterly operating margin was a negative 11% compared with a negative 5.3% in the year-ago quarter. At the end of the first half of 2012, the company had $5,392 million in net cash and marketable securities, down 8% year over year.
Devices & Services Segment
Quarterly total revenue was approximately $5,168 million, down 26% year over year. Within this segment, Smartdevices (including smartphones and tablets) revenue was $1,980 million, down 34% year over year. Mobile Phone revenue was $2,943 million, down 11% year over year. Other revenue was $245 million, down 65.1% year over year.
Smartdevices average selling price (ASP) was $194, up 7% year over year. Mobile Phone ASP was $40, down 14% year over year. In the second quarter of 2012, Nokia shipped 10.2 million smartdevices and 73.5 million Mobile Phones, down 39% year over year but up 2% year over year, respectively.
Nokia Siemens Network Segment
Quarterly net revenue was approximately $4,295 million, down 8% year over year. Quarterly adjusted operating profit was approximately $35 million, down 33% year over year. Adjusted operating margin was 0.8% compared with 1.1% in the prior-year quarter.
Location & Commerce Segment
Quarterly net revenue was approximately $364 million, up 4% year over year. Quarterly adjusted operating profit was $53 million, up 486% year over year. Adjusted operating margin was 14.5% compared with a mere 2.6% in the year-ago quarter.
For the third quarter of 2012, Nokia expects its Devices & Services operating margin to be similar to that of the second quarter of 2012, plus or minus 4%. However, Nokia Siemens Networks segment operating margin will improve in the third quarter. 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.
Nokia remains in dire strait as the operating margin of its core Devices & Services segment plunged measurably. Recently, the company was forced to reduce the price of its flagship 4G LTE-enabled Lumia 900 smartphone in the U.S. by a massive 50%, reflecting the company’s struggle for achieving a meaningful foothold in the smartphone segment. Importantly, AT&T Inc. ( T - Analyst Report ) was Nokia’s carrier partner for Lumia 900. We maintain our long-term Neutral recommendation on Nokia. Currently, the company has a Zacks#3 Rank, implying a short-term Hold rating on the stock.
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