New Nokia core business estimates profit raise next year

The core business of the freshly transformed Nokia – Nokia Solutions and Networks (NSN) reported lower than expected sales and profits as the Finnish company assured the telecom gear producing unit would recover next year.

NSN, which makes network gear for the telecoms industry, should see its underlying operating profit margin rise from 8.4% in the third quarter to 12% in the fourth quarter, plus or minus four percentage points. That is well ahead of forecasts from Nordea for a margin of 10%. NSNs net sales amount to 2.6 billion euros, 26% lower from a year earlier, and operating profits of 218 million euros which down around 30%.

Comparing to analyst forecasts for net sales of 2.86 billion euros and operating profits of 228 million euros, results were disappointing especially for investors who have been focused on the earnings since the announcement of Microsoft buying the mobile phone business of Nokia for 5.4 billion euros. Nokia will make more than 90% of its revenue from NSN, after the completion of the Microsoft deal.

Looking at the recently sold mobile phone business sales lost 19% to 2.89 billion euros, slightly above forecasts of 2.88 billion, while the operating loss of 47 million was ahead of the 51 million estimated by analysts.

Nokia confirmed that shareholders who werent paid dividends in the past few quarters, would soon receive some cash from the company, after it has completed its strategy review for its three remaining businesses: NSN, mapping, and advanced technologies which includes companys patents.

Nokia’s shares soared 5.4% in early afternoon trading on Tuesday to 5.26 euros as they processed the positive outlook for NSN this quarter. Since the announcement of the Microsoft deal, the shares are up almost 80%.

“The NSN margin guidance is certainly what’s pushing the shares up,” said Sami Sarkamies, an analyst at Nordea Bank AB in Helsinki. “But with the unit’s sales so far below expectations management may need to make the trade-off and sacrifice some profitability to boost revenue. NSN needs to do much more to lift sales.”

This month, Nokia introduced its first tablet and two smartphones with six-inch displays. The products would try to push Microsoft and Windows mobile-device lineup closer to Apple Inc. and Samsung Electronics Co. in a battle for the tablet and smartphone markets.