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Buy Nokia Ahead of Earnings

Revenue, however, will be the biggest question mark during the call. Management has not figured out ways to reverse the trend of declining sales and market share. The 25% year-over-year decline in overall unit sales in the April quarter was the perfect example. Also disappointing was that Nokia's overall revenue declined 20% despite a 30% sequential improvement in Lumia sales - leading to a 32% decline in the devices business.

In the upcoming second-quarter report, the Street will be looking for a loss of 2 cents per share on revenue of $8.62 billion, which would represent declining revenue of 11%. Given how poorly BlackBerry (BBRY) performed in its first-quarter report, along with downbeat results from Samsung, I would be surprised if Nokia was able to meet consensus revenue.

But as I've said above, even if Nokia were to miss on revenue, that still wouldn't mean it was a disappointing quarter -- not if cash flow is improving. Given the deficits this company has had to work with, Nokia's overall revenue performance has to be assessed on a quarter by quarter basis at this point. Let's not also forget that its recent acquisition of NSN, which should produce higher margin returns over the next couple of years will require more time.

It's still too premature to speculate on how much value NSN will bring. But I will be paying attention to any details management will share during the conference call about Nokia's new capabilities and growth prospect.

From an investment perspective, I'm beginning to believe in Nokia's recovery potential. Accordingly, I would be a buyer here ahead of earnings and I expect that Nokia will become the subject of acquisition rumors as profitability continues to improve.

At the time of publication, the author was long AAPL.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and the founder and producer of the investor Web site Saint's Sense. He has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
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