Nokia (NOK, Financial) posted results for the second quarter that were not satisfactory. The company, on one hand, posted good growth in the profit while it failed to grow sales impressively. Management is citing currency fluctuations as the key reason behind the company’s declining sales. But Nokia has enough fuel in its pipeline that can help the company overcome its weakness. Management thinks that Nokia is on the right track and has enough steam to deliver growth in the future.
What's Nokia up to
In the recently reported quarter, Nokia posted a good 20% improvement in profits which indicates the excellent operational efficiency of the company. But the sales of Nokia were largely hit by a big margin reporting a decline to 2.9 billion euros as compared to 3.2 billion euros from last year. This shows that the company is improving which is evident by the narrowed loss.
Nokia posted mixed results. The company, however, is showing good signs and can be a good long term holding as its prospects looks promising. Despite, decline in the sales of the company by a big margin, there are many upcoming introductions in the market by Nokia which are expected to be received by the customers and the investors positively, helping Nokia to improve its sales as well as market share.
Nokia is pleased with it success in pulling back its HERE maps from the app store. Nokia is now bringing back its mapping app back to iOS on the back of compatibility issues of iOS 7 which harmed user experience. Nokia is trying to rectify the problem with its app which failed to capture market. It was meant to be wrong move by Nokia.
But Nokia is launching a new app and is expecting that it will work flawlessly on iOS 8. Besides this, it is also launching its new app: Mobile Map App, before the end of the year which works without internet. This might prove an attraction to the customers towards Nokia and can surely help to improve Nokia’s sales. With this Nokia can give good competition to its peers such as Google and Apple.
More impressive moves
Moving forward, Nokia is working on being cost effective also. It has many cost cutting moves including restructuring on internal operations. It is also making efforts to implement lean and Kaizen methodology across the company to increase automation. In addition, Nokia has also made alterations in its management welcoming Rajeev Suri as new CEO. Nokia is focusing at using Mr. Suri’s financial expertise and skills to initiate new moves focused on the growth of the company in future.
Looking at the international front, the company is seeing impressive traction and the growth rate in regions such as Asia Pacific and China is robust. The main reason for such a tremendous growth in these regions is the 4G LTE roll out which is one of the most lucrative opportunities present now. Nokia is expecting further traction for its phones in this environment, driving its sales high in future. However, Nokia is expecting weakness in Europe due to weaker economy and stiff macro economic conditions. But as the company is moving with such a pace the management is expecting good growth in Europe as well in days to come.
Similarly in the regions such as Middle East Nokia is seeing impressive growth rate but it is again not sure about its business in Latin America and Mexico. In the past the company was hit in regions due to excessive reliance on these but which later turn bad for it. The company is expecting weakness to continue in the next quarter as well as these weaknesses will take time to vanish.
Conclusion
Nokia is making advances to be profitable by narrowing its losses. The forward of P/E 20.46 indicates good growth in its earnings for the future. Nokia is expected to be a lucrative bet for the long term. All these points make Nokia a good long term investment, so investors seeking long term gains should consider Nokia for their portfolio.
