Nokia raises 2015 outlook, share price soars

Finnish telecom group Nokia on Thursday raised its full-year outlook after posting better-than-expected third quarter earnings, especially in its networks unit, sending its share price soaring by over eight percent.

At a time when operators are postponing or cutting investments in the roll-out of 4G networks amid a challenging economic climate, Nokia has seen strong sales growth in China which has compensated in part for declines in North America and Europe.

Once the world's top mobile phone maker, Nokia's main business is now its Networks division.

"While net sales were down slightly year-on-year on a reporting basis, Networks notched one of the highest underline gross margins in our history at 39.5 percent," Nokia chief executive Rajeev Suri told reporters in a conference call.

The Networks division posted an operating margin of 13.6 percent in the third quarter, up from 13.5 percent a year ago.

For the full-year, that figure is expected to come in "around or slightly below the high end of the long-term range of 8 to 11 percent," instead of the "midpoint" range previously forecast, the company said.

Overall Nokia's third quarter attributable net profit dropped to 152 million euros ($166 billion), a fifth of what it was in the same period a year ago, while sales were down two percent to 3.0 billion euros ($3.4 billion).

Suri said it was the Networks results that brightened the picture.

"The performance at Nokia Networks was the highlight of the quarter, and allowed us to raise our full-year outlook for that business," he said.
 
- 'Significant news' ahead? -

A senior analyst at Nordea Markets, Sami Sarkamies, told AFP the company's third-quarter performance was a positive surprise.

"The result was clearly above expectations and that was entirely thanks to the network business where the sales were as expected but the margins were clearly higher," Sarkamies said.

As for Nokia's smaller Technologies division, Sarkamies anticipated interesting times ahead.

"They are expecting an agreement with Samsung by the end of the year, which will be significant news for Nokia," he said.  

Nokia has been engaged in arbitration with Samsung since 2013 to settle royalty payments for its smartphone patent license that Samsung has opted to use. 

And last week Nokia announced that the French authorities had given a final go-ahead for the acquisition of its French-US rival Alcatel-Lucent, which Nokia expects to conclude in the beginning of 2016.

Sarkamies pointed out on a more negative note that Alcatel-Lucent's quarterly report, which was also published on Thursday, was not very strong.

The company saw losses of 206 million euros in the third quarter, down from 18 million during the same period in 2014. It has only had one year of profit since it was created in 2006.

"But in the short run ... the better Nokia looks in comparison with Alcatel-Lucent, the likelier it is for the Alcatel-Lucent shares to be sold to Nokia," Sarkamies pointed out.

Thanks to the imminent tie-up with Nokia, Alcatel shares soared more than eight percent in afternoon trades in Paris.

Nokia said it would treat its shareowners to a dividend distribution of 4.0 billion euros ($4.3 billion). 

Nokia's share price surged 9.38 percent in the first 20 minutes of trading on the Helsinki exchange, and remained up 8.31 percent in afternoon deals.

Nokia was the world's top mobile phone maker between 1998 and 2011 but was overtaken by South Korean rival Samsung after failing to respond to the rapid rise of smartphones.

The Finnish company sold its handset unit to Microsoft in 2014 for some $7.2 billion, which dropped using the Nokia name on Lumia smartphones.

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