The Daily Interview: Can Nokia Continue to Shine?

Apparently, not all warnings are created equally.

Todd Bernier Analyst, Morningstar

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Following up two depressing revenue warnings from Ericsson(ERICY Quote) and Motorola(MOT Quote), Nokia(NOK Quote) updated the Street on its third-quarter progress Sept. 11. The mobile-phone market share leader pledged to keep its profitability steady, but said it would fail to achieve previously predicted growth over last year's third-quarter revenue.

Investors could've cared less about sales growth, though, jumping for joy at Nokia's assertion that its margins and handset demand are still healthy, and sending its stock price up more than 10% Monday in one of the day's few bright spots. The stock was up again slightly Tuesday. We sat down with Morningstar wireless analyst Todd Bernier to see what all the fuss was about.

TSC: Investors had a very positive reaction to Nokia's announcement last week. What was behind that?

Bernier: They made their numbers on the handset side, but they missed their growth numbers on the network side. For Nokia, 70% of revenue is generated by handsets. That's the big story.

TSC: Even though we hear that there's not a new generation of handsets to compel buyers, it seems like the handset market is holding up much better than the base-station equipment market.

Bernier: If you're a [carrier], the last thing you want to do is reduce how much you spend on things like handsets because those are sources of revenue, as opposed to networks. That is why you're seeing Motorola and Ericsson blow up, because networks are a much bigger piece of their business.

TSC: What do you mean when you say handsets are generators of revenue for carriers? ...