Bloomberg: Nokia to buy out Siemens?

According to a Bloomberg report, Nokia (OMXH: NOK1V, NYSE: NOK) is set to announce an acquisition of Siemens' (FWB: SIE) stake in their 50-50% telecommunications equipment joint venture Nokia Siemens Networks (NSN) as early as this morning. The companies have long been seeking ways to resolve the ownership, with Siemens wanting to be more focused on its other escapades. An aggressive cost cutting program has finally turned NSN profitable although quarter-on-quarter and cyclical swings are likely to continue. According to sources, Nokia would pay Siemens under 2 billion Euros for the stake and assume all its responsibilities.

This potential deal could be a catalyst for further moves involving NSN with a possible new owner or a spin-off among potential options. Speculation about Nokia's future direction and potential deals involving some of its divisions seem to be an almost daily occurrence in the last few weeks as analysts continue to view the sum of parts to be greater than the combined entity valuation. As an only move, Nokia would have to take on some more debt to finance the deal, further lessening room for error.

Nokia's long run in Euro Stoxx 50 comes to an end

STOXX Ltd. posted information on component changes taking place in its Blue-Chip indexes on Friday. As of March 18th this year, Finnish technology company Nokia (OMXH: NOK1V) will no longer be a part of Euro Stoxx 50, the leading such index for the Eurozone involving leading companies in their sector in Euro area. Replacing Nokia will be the European Aeronautic Defence and Space Company N.V. EADS (Euronext: EAD, BMAD: EAD, FWB: EAD).

Since index funds that are tracking the indices need to act accordingly, such events tend to have an effect in the stock market price at least in the short term. Nokia has been a Stoxx 50 component since 1998. It was taken away from STOXX Europe 50 in 2011. Following a period of strong performance, Nokia has been lagging in recent days. The company is not paying dividends for fiscal year 2012 as it continues to try to turn around its fortunes.

Accenture exist Oulu

As has already been speculated for a while, Accenture (NYSE: ACN) is closing its unit in Oulu, Finland. This means some 140 employees handling mainly outsourcing duties to Nokia (OMX: NOK1V) will be let go in Oulu and 275 in total in Finland with a further 46 workers laid off. It leaves the big multinational’s Finnish operations with just over 1500 people in Helsinki and Tampere. IT consultancy functions will be concentrated in the latter location. The employees moved to Accenture as a part of a deal with Nokia last year where the Finnish mobile phones maker wanted to find a way to rid itself of Symbian developers in a way that would leave it with least amount of blame and backlash. Accenture said at the time it foresaw great opportunities to utilize the skills of Nokia engineers in various fields but even before this final axe, nearly half of the workforce moved to the company in Oulu had been made redundant.

Nokia sells headquarters

Nokia (OMX: NOK1V, NYSE:NOK) has managed to find another 170 million in liquidity as it has found a taker for its 48 000 square metre headquarters in Keilaniemi, Espoo for 170 million Euros. The company will lease the premises back from the buyer which is named Exilion. The real estate investor is owned by four Finnish public pension funds. This continues a run of non-core asset disposals as Nokia is fighting off credit rating downgrades by building cash buffer. The sale is expected to complete by the end of this year.

Enthusiasm on Nokia Q3 result wanes once Wall Street opens

Expectations for Nokia ‘s (OMX: NOK1V, NYSE: NOK) Q3 2012 were very low and the report contained many positive surprises to analysts but apparently less to avid investors. The positives included strong sales of the now smartphone-defined Asha touch phones that helped push Mobile Phones segment sales up to 76.6 million units, non-IFRS operating profitability, record strong result from subsidiary Nokia Siemens Networks, many Location & Commerce licensing deals for Navteq; particularly from Automotive sector and continued monetizing of the strong patent portfolio.

Microsoft union is being questioned more and more. Without flopping first Lumia-line, Nokia would have had a good quarter. Those sales were down sequentially to just 2.9 million devices. Even Symbian devices are still clearly outperforming Lumias. Second generation Lumias that will be running Windows Phone 8 were billed as much more than just Windows phones. Nokia will try to find new ways to get more visibility for the Lumia line. Lumia 920 and Lumia 820 will mostly miss Christmas sales, only apparently becoming available in select markets from “November”. More features were promised and product differentiation for different operators continues.

Nokia’s sales were very poor in USA and China where as Europe, India and Brazil did far better. Cash burn was a little bit slower than feared, pushing any potential crisis further down the road. Structural adjustments will start to have a positive effect soon. Non-core asset divestments have continued since the end of the quarter and there will still be forthcoming divestments.

In Helsinki Nokia was up almost 10% for the day but once the Wall Street opened, the stock turned to the red. There is a clear difference in how Nokia is viewed across the pond. This can also be seen in the media, where of course locals want their own companies to do well. This could have even been one reason for the Microsoft union. Nokia will also continue investments in Asha phones. Going forward, near-term visibility is still low and Devices & Services Q4 doesn’t look too rosy. NSN could have sequentially somewhat worse times but is now in a good position with a good product mix.

TDC gives up on Nokia?

Danish press is reporting that the nation’s largest operator TDC A/S (OMX: TDC) is dropping Nokia (OMX: NOK1V, NYSE:NOK) out of its stores altogether over a dispute regarding Nokia’s contribution toward marketing costs and phone subsidies. The source is an internal email that website mobilsiden.dk apparently got a hold off. The two companies refused comment. Other three major operators TeliaSonera (OMX: TLSN), Telenor (OSE:TEL) and 3 continue to carry Nokia phones. Ailing Finnish company has worked hard to improve its historically mixed operator relationships world over but its quick burn rate has forced the company to be more cash conscious in its operations and to try to find additional sources of liquidity.

***UPDATE Monday afternoon***

Following intense media speculation, the two companies quickly struck a deal and TDC will continue to offer Nokia's products

Stephen Elop on Microsoft partnership

Nokia’s (OMX: NOK1V, NYSE: NOK) controversial CEO Stephen Elop admitted that the first Lumia line hasn’t done as well as the company was hoping for in an article with Wall Street Journal’s All Things Digital. This is likely an admission of the very evident slowdown in Lumia sales growth rate as of late. He also touched on the partnership with Microsoft (NASDAQ: MSFT) and underscored the importance of Microsoft’s commitment in Nokia maps. While he admitted that the relationship is sometimes complex, the communication lines between the management are open and often used.

It also became apparent that the Finnish company isn’t looking to do a device for anyone else, effectively stopping any speculation Nokia might build a Microsoft phone. Speculations that Microsoft is also going to make its own smartphone following the information it will be making a tablet has been weighing on Nokia in the past day or two. Elop said he has no indication that Microsoft plans to do so but says if they want to they can do so and that Nokia simply needs to continue to build devices that stand out from the pack.

Nokia World news

In connection with the Nokia World Conference 2012, Nokia (OMX: NOK1V, NYSE: NOK) (NASDAQ: MSFT) held a press conference in New York this morning local time. Samsung had gotten ahead of Nokia in unveiling its upcoming Windows 8 phone although Nokia claims to have the first working one in its hands. The webcast had technical issues in the start, confirming a worrying trend of product launch hiccups.

Lumia 920 will be the new flagship phone running Windows Phone 8. It is being billed PureView device, has wireless charging capability. Nokia maps and camera quality are what the company still views as main differentiating factors going forward. Nokia has been making some lofty gains in anticipation of new launches. It seems the leaks of previous days were pretty accurate and the stock is under some pressure so far today.

Another rumour skins some Nokia retail investors

Nokia had already gone too far too fast with a 50% gain in only couple of weeks. The run-up went parabolic yesterday and early today based on a rumour that Lenovo (SEHK: 0992) might be interested to acquire the Finnish mobile phone maker. There is also a lot of speculation about Nokia World releases and insider buys last week have also carried Nokia.

Despite of these things explaining part of the upturn, it looks like market effectiveness might be compromised by the days we live in: blogs and news outlets ready to pick up fantastical stories found in any given social platform. These are certainly used by pros. Lenovo today denied the rumour. Some investors were able to figure out by themselves, that it would be a very hard move for Lenovo to make, but many were caught by surprise too and the stock quickly 15% downswing for the day.

Nokia leaders buy shares

Newspaper Taloussanomat reported that Nokia’s (OMX: NOK1V, NYSE: NOK) leaders have been actively acquiring shares in the Finnish company in recent days. The newspaper has been researching insider registry and was also told by the company that not only CEO Stephen Elop but also Chairman Risto Siilasmaa has made purchases in recent days. Board Member Henning Kagermann has also added into his holdings. Most of the moves seem to have been made last Friday and Nokia gained almost 10% in that day. The stock has continued its current rebound today. Elop has been scrutinized for his slow pace of acquiring shares in the company, which recommends decision makers to acquire shares corresponding to around 2-3 year wage.

Nokia said today that its Board of Directors has authorized the planned maximum number of stock options given to under Nokia Equity Program 2012 from 8.5 million to 11.5 million. These will be handed to senior level employees who are critical to future success of the company. Nokia specified these employees are not the CEO or the members of Nokia Leadership Team. Maximum dilution to current shareholders from the entire compensation program is under 2% and the exercise level where it would be profitable to use the options stands considerably above current market price, which is supposed to provide incentives.

Nokia’s report bad but not utter disaster

While it is clear that Nokia’s (OMXH: NOK1V, NYSE:NOK) is still in a death spiral, it is not yet in the innermost circle. Second quarter 2012 result averted the worst. Sales were up 3% sequentially although down 19% year-on-year. Reported EPS was -0.38 EUR and non-IFRS number of -0.08 was close to expectations. Nokia Siemens Networks showed some life with non-IFRS operating margin peeking just above zero, even if reported number is still deep in the red.

The stock was up almost 7% going into the report, most likely on some profit taking from short sellers. Since the report it has held onto those gains and swiftly visited far higher as well. The closely followed Lumia sales of 4 million were somewhat better than anticipated. The company does however admit that third quarter is expected to be challenging, due to the transition period ahead of Windows Phone 8 launch. Feature phone business highlighted by the new full touch Asha phones are supposed to hold the fort for the time being.

Monetizing other assets such as location services and disposal of non-core assets gained speed. The company also filed a host of new patents and is seeking ways to gain more revenue from existing strong portfolio. Returning Devices & Services to cash flow positive is extremely critical. The net cash at the end of the quarter was 4.2 billion and gross cash 9.4 billion. This is lower due to 742 million Euros handed out as dividends that in hindsight might have been better to withhold. Considering geographies, the sold mobile devices slide was fastest in China and North America while Middle East & Africa and Latin America held best.

Ericsson misses badly

Ericsson (OMX: ERIC B, NASDAQ: ERIC) reported quarterly numbers that missed analysts’ profit expectations by a country mile. Sales increased slightly to 55.3 billion on the heels of strong growth in services offering. Much of that was offset by declining networks sales particularly slower CDMA equipment sales and overall weak development in China and Russia. Network modernization projects in Europe are delivering very poor margins and gross margin fell sharply sequentially (37.8%) and even year-on-year (33.3%) to just 2%. The effect is supposed to lessen as the year goes on. EBITA margin excluding joint ventures and Sony Ericson sale was 8% while net income of a mere 1.2 billion leaves investors with a quarterly EPS of 0.78 SEK (0.11 USD).

Dagens Industri writes that analysts’ consensus EBIT was 2.5 billion vs. the actual 1.8 billion. Cash flow from operations was negative as high working capital level is carried due to ”late invoicing”. The situation with ST-Ericsson, a mobile platform and wireless semiconductor solutions providing joint venture of Ericsson (OMX: ERIC B, NASDAQ: ERIC) and STMicroelectronics (NYSE:STM) was called challenging. Its sales have dropped considerably due to a significant drop in sales to a single large customer (likely Nokia (OMX: NOK1V, NYSE: NOK) and continued decline in legacy products.

Nokia closes distribution centre in Chengdu and Shanghai

One of the presumed remaining strengths of Nokia Oyj (OMX: NOK1V, NYSE:NOK) had been its wide distribution network in China, capable of reaching the farthest corners of the vast country. Now as a part of its global round of cuts, it will be closing distribution centres in Shanghai and Chengdu according to an interview given to Bloomberg. This leaves the Finnish mobile maker with logistic centres only in the Eastern coastline in Beijing and Guangzhou. Some jobs will be lost as a result. The quick fall into irrelevance in China can certainly be seen in the Western parts of the country, which is supposed to be a future growth hub, where Nokia’s stands attract very little interest and those people who still remember the company wonder what happened.

The Apple and Google dominated press continues to point out that nobody should buy a Lumia product ahead of Windows Phone 8 launch, since the latest OS will not come into the then old devices. It has to be said, that since it is hardly normal for the latest system to be added into legacy products, the negative press against Nokia’s devices from this issue seems a little excessive. Anecdotal evidence from online trends and data released by sellers would suggest that Lumia’s momentum has stalled somewhat as a result. The stock nonetheless recovered slightly yesterday going into the interim report, most likely due to some short covering after it had become technically oversold.

Inquirer: Nokia claims Google needs to pay for patent licenses for Nexus 7 tablet

British technology tabloid The Inquirer reported that Nokia (OMX: NOK1V, NYSE:NOK) claims Google’s (NASDAQ: GOOG) Asus (LSE: ASKD, TWSE: 2357)-built tablet Nexus 7 expected in the market soon is infringing on several of the Finnish company’s Wi-Fi/WLAN related patents. Nokia said that neither Google nor Asus has licensed the standards essential patents. The Finnish company said that companies who haven’t yet done so should approach Nokia to obtain the licenses.

Nokia has started to quickly try to locate additional sources of revenues as the bottom of its cash vault is starting to show. In last few weeks, some deals involving the location services have been announced and company spokesman have also said they will try to better monetize the wide patent portfolio. Some of that is likely to be in the market as well, and such comments could be feelers as well. Google and Asus haven’t made any comment. They might be well served to wait for a suit that Nokia might well deem too expensive rather than to choose to pay up from the bat.

Siilasmaa back Elop, thinks Windows 8 will help

New Nokia (OMX: NOK1V, NYSE: NOK) Chairman Risto Siilasmaa was interviewed by national broadcaster Yle in TV1 program Päivän Kasvo ("today's face")- show yesterday. It is available for online-viewing from Yle Areena at the moment. He said that painful decisions had to be made but is excited about working with a lot of new positive upcoming issues. More cuts may still follow. He believes that bad news come like waves and once the tide turns, investors will focus more on the positives. In a rather striking comment, he says that he himself always calculates the number of shares and feels that if there are no more stocks, he has not lost anything if the market value has gone down.

Siilasmaa said that Nokia hasn't bet everything for Windows Phone but that "dumbphones", location services in particular, NSN and patents all are important. Siilasmaa also said that Nokia indeed has some back-up plans but believes strongly in the current strategy. He admitted that there was no chance to continue with Symbian. In his view the Symbian slide has not escalated at any point but the trend is steadily down. He said that around the time of new CEO hire, very thorough internal review lasting several months was done where Nokia's own operating systems such as MeeGo, Android and Windows Phone were compared and the view was that in Android system only Samsung will be able to do well, own systems cannot be competed with, thus leaving Microsoft as the clear choice.

To a straight question regarding how much time CEO Stephen Elop has, he instead discussed how difficult situation Elop was thrown into following O-P Kallasvuo but that his actions and decisions have been very transparent and analytical, thus rebuffing conspiracy theorists claiming he is a Microsoft trojan. Siilasmaa twice sidestepped how much time Nokia has to turn the ship around, just saying that with new Windows Phone 8, positive development will be seen. He twice stressed how important new user experience will be achieved once you can switch seamlessly in between screens of personal computer, tablet, smartphone and television (with Xbox).

Microsoft market rumours of own Windows Phone plans subside

A Microsoft (NASDAQ: MSFT) executive apparently told InformationWeek that the company has no plans for own-branded Windows 8 Apollo smartphones, following a similar move into tablets. Nokia’s (OMX:NOK1V, NYSE:NOK) Microsoft-cultivated CEO Stephen Elop also said the same in an interview with newspaper Kaleva during his visit in northern Finnish town of Oulu, where Mr. Elop tried to convince everyone, that Nokia will stay in Oulu despite heavy personnel cuts expected soon. There had been widespread media speculation on a phone from Windows, with investment houses reportedly getting wind from contract manufacturers that Microsoft was going to make such a move. This then could explain a flat out denial, which is unusual for the company.

Nokia slid some 10% early on in the week behind that and some bad media press on its current Lumia-line based on the fact that they will not get the new Windows OS as well as the news that the operating system is apparently coming in later than expected, extending the current bleeding of money. These offset the news that Ford chose Nokia’s location services. Other mobile phone manufacturers that are expected to be working on a Windows 8 phone include Samsung, HTC and Huawei.

Microsoft unveils news affecting Nokia

Nokia's (OMX: NOK1V, NYSE: NOK) master Microsoft (NASDAQ: MSFT) has announced plenty of news also concerning the Finland-headquartered mobile phone manufacturer this week. Microsoft will start to make tablets under its own brand, something which places it in direct competition with its licensers. Hints of a Nokia tablet have been dropped every now and then. Therefore it would seem that either Nokia was unable to deliver in time and the development program is now one of those going under or there was some kind of a back-office deal. Mostly the market chose to think it is anyhow good for Nokia if the ecosystem grows and that tablets would have been away from its comfort zone no matter what.

More immediate pains concerning sales are to be expected since just as rumoured, current Lumia phones will not be updateable to Windows Phone 8 operating system known as Apollo. There will however be a separate OS update for the current devices. Yesterday news from Germany suggested this is one reason why the current Nokia’s flagship phone Lumia 900 hasn’t been taken for sale.

News from China are speaking off further deterioration of Nokia’s business. I have noticed that Nokia Lumia phones are placed in a remote corner with most vendors, while Symbian phones rarely even around anymore. This is the case even in Tier 4 cities and smaller, a previous stronghold of the company.

According to Microsoft, Nokia Maps or rather Navteq maps will be coming to all Windows 8 phones, as the Finnish company will apparently license them. This would perhaps take away some of its competitive advantage vs. other Windows-phone manufacturers but on the other hand give it another revenue stream. All and all, it is not like Nokia has so far been able to communicate its big advantage in map and navigation quality to consumers. Analysts are diverging in their view of the stock. Target prices have certainly been cut, but while others think there is way more room to drop, some feel that we could be close to bottom.

Nokia’s problems between the lines

A near 20% plunge on the heels of yet another disappointing but not unexpected announcement from Nokia (OMX: NOK1V, NYSE: NOK) wasn’t instantaneous by any means, given that Nokia’s poorly worded statement made it extremely difficult to to get a handle of the current situation. True extent of Nokia’s problems should be evident upon closer review.

Nokia says it is focusing ever more on its Lumia product line running Windows operating system. This suggest that a) it is not so sure that Asha line and Series 40 and Series 30 devices can hold the fort against Android any longer and b) its projects involving Meltemi aimed at creating a lower category operating system have failed highlighted by the closure of Ulm R&D site. The company also announced its differentiating competitive advantages to be location based applications and imaging solutions hinting, if not proving, that it has nothing big coming in the pipeline. Competitors are by no means sitting idle by in these issues. It is quite unprecedented for a global giant to bet the house on one hand in such a manner and future management books are getting plenty of material to tap into.

Also management is now hinting selling some families of patents but not all of them. This suggests the desire to get some more cash to be able to finance further losses somewhat longer. Many investors have been hoping for a takeover for quite some time. Any such a patent sale should make it less likely and obviously a takeover is rather unlikely as long as competitors and other interested parties can simply wait for Nokia to weed out excess fat in the organization and watch stock market value and long-time average prices go down.

CEO Stephen Elop brought in his own marketing Chief quickly upon arrival. Now after less than two years have passed and some nice payments have been collected, a replacement is being made and Elop is saying that there is a lot to do in marketing & sales. For this one Elop cannot hide behind the numerous mistakes of the previous CEO. The remaining confidence in Elop is now quickly eroding. He said investors will understand what Nokia is doing later on. The realization that investors are coming into are certainly not positive so far. Elop also said only months ago, that Salo factory will be important for the company going forward. Such propositions do nothing to promote employee loyalty and will certainly eat into the working motivation.

While the U.S. Chief Chris Weber has shown some results and is thus justifiably taking a higher profile in upper management, the top leadership overall seems to be overly focused on the United States market as a fix all end all kind of a proposition. The company has failed to defend its brand and market share in Asia, where it by no means was starting from a disadvantage in a similar manner as in America. The harsh realization that Nokia will now especially focus on a number of geographies suggest the company is almost giving up and it even had new factories coming in ready just now adding to its now clearly too large manufacturing base, presumably warranting further cuts later on.

The ratings agencies which these days are terrified to be caught having an investment-level grade in a company that goes under, have already pushed Nokia to junk or close to junk status. If the global economy avoids a major depression, the situation should not be quite so dire so despite incoming significant debt payments, re-financing should not be impossible for Nokia for now but the battle vest no longer looks limitless.

Another round of Nokia cuts and a profit warning announced

Finnish mobile phone manufacturer Nokia (OMX: NOK1V, NYSE: NOK) had been hinting of more large scale cuts to come in connection with its Q1 2012 results, as the company admitted it is now smaller than it used to be. For weeks on end speculation of the number of redundancies had been going on, as the company waited to hear news on how the new Windows phone line-up starts selling and how quickly the legacy Symbian phones die out.

Nokia is also carving out its own heart with the closure of manufacturing at Salo factory and it also plans to close down Ulm, Germany and Burnaby, Canada facilities. R&D activities in Salo do however continue. These closures come at a time when others have done the strategic shift to Asia years ago and are propably closer to bringing back production than other way around. In total up to 10 000 jobs are to be lost by the end of 2013 with 3700 in Finland.

The measures are expected to result in non-IFRS operating expenses savings of nearly 2.5 billion Euros per annum by the end of 2013. In 2010 the total Devices & Services expenses were 5.35 billion and Nokia now targets a level close to 3 billion per year. The anticipated 1 billion Euros in restructuring charges comes on top of an earlier 900 million Euros. Also Nokia lowered the Devices & Services outlook to state that it will definitely fall below operating margin level of -3% and warned that “competitive industry dynamics” will continue to have a negative impact on Q3 2012 as well.

Nokia plans to invest further in location based services. Nokia maps have until now been another differentiating factor, although with continued pressure from Google and Apple entering that space as well, that remains to be seen as well. The rumoured divestment of luxury phone brand Vertu to private equity firm EQT VI was confirmed. Nokia is keeping a 10% stake. Nokia is also doing an acquisition in getting imaging specialists, technologies and intellectual property from Scalado Ab with Scalado’s Lund site becoming a key for Nokia’s imaging software development.

Several executives are also getting the axe with Chief Marketing Officer Jerri Devard, Mobile Phones unit Chief Mary McDowell and executive Vice President of the Markets Niklas Savander being replaced by Tuula Rytilä, Timo Toikkanen and Chris Weber with Susan Sheehan becoming senior vice president of communications and Juha Putkiranta the executive vice president of operations;. The share is set to open sharply lower.

Nokia personnel briefing on Thursday morning

Newspaper Salon Seudun Sanomat wrote that remaining employees at Salo have been called in for a video briefing. Reportedly the transmission can be followed on other Nokia (OMX: NOK1V, NYSE: NOK) working cites as well. Personnel representatives for R&D department will be briefed first. It seems nobody is aware of what exactly will be said although most are expecting another round of cuts. Updates on strategy remain a possibility as well.