|NOK: RBC Sees Hope for Lumia, Canaccord Sees Challenges|
By Tiernan Ray
A couple of Street observers offered differing points of view today on the health of Nokia‘s (NOK) “Lumia” smartphones that run Microsoft‘s (MSFT) “Windows Phone” operating system, a day after the latest model, the “Lumia 900,” went on sale in the U.S. at AT&T (T).
RBC Capital‘s Mark Sue reiterated an Outperform rating on shares of Nokia, and a $9 price target, writing that the company is “coming to America in a big way,” and that the two companies are “spending bucks to find relevance.”
Although Google (GOOG) and Apple (AAPL) dominate 50% of smartphone sales, and, with Samsung Electronics (005930KS), 75% of the profits in the market, Sue lays out some hopeful notes for Lumia, writing that “Thus far we would characterize the uptake of Nokia’s Lumia 710 and 800 as ‘decent’,” adding that “For the 900 series, feedback, while early, seems constructive on the hardware and start screen’s live tiles.”
And carriers, he writes, want to diversify away from Apple’s dominance, and they want to forestall Google’s encroachment on their revenue opportunities with its “Google Wallet” payment scheme.
Still, Nokia remains a transition in progress, he observes, as Q1 “may be another quarter of transition and the continued slide in the legacy Symbian business may mean Nokia may post units closer to our street low 90M vs. consensus of 92M.”
However, Canaccord Genuity’s Mike Walkley today reiterated a Hold rating, while cutting his price target by a dollar to $5, writing that this year “remains a challenging transitional year” for Nokia.
Carriers do want an alternative, he agrees, but it will take investment in the “ecosystem,” writes, and this is the “critical year” for that investment, he writes.
Walkley cut his 2012 estimates on both lower Windows Phone estimates, and lower sales of Nokia’s older platform, “Symbian“:
Our global checks indicated mixed Lumia sales with price declines helping sales trends in Europe. However, our checks indicated extremely poor Symbian sales trends and seasonally soft feature phone sales, resulting in our lowered Q1/12 Devices and Services sales estimate from €4.9B to €4.7B. We have also lowered our overall Windows smartphone estimates, resulting in us lowering our 2012 pro forma EPS estimate from $0.05 to ($0.03) and our 2013 estimate from $0.54 to $0.40.
Nokia shares today rose 3 cents, or 0.6%, to $5.14. Microsoft shares fell 42 cents, or 1.3%, to $31.10.