Why Nokia (NOK) and Microsoft (MSFT) Are Down Today

NEW YORK (TheStreet) -- Shares of Nokia (NOK) and Microsoft (MSFT) fell Thursday following an earnings report from the smartphone maker that saw a rare decline in Lumia smartphone sales.

Nokia fell 8% to $7.09 while Microsoft declined 0.5% to $35.75.

In the fourth quarter ended Dec. 31, Nokia said it sold 8.2 million Lumia phones running Microsoft's Windows Phone platform. In the previous quarter, the Finnish company sold 8.8 million Lumia devices. Revenue from handset sales fell 29% in the fourth quarter from the same period in 2012.

Nokia said it sold a total of 30 million Lumia phones in 2013, compared to 13.3 million sold in 2012. Microsoft, which is in the process of purchasing Nokia's handset division, said it needs to sell 50 million Lumia smartphones in a year to break-even on the deal.

Nokia Solutions & Networks, the unit that will remain after the Microsoft purchase, reported revenue of 3.1 billion euros in the fourth quarter, a 22% decline from the year-ago quarter.

TheStreet Ratings team rates NOKIA CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about its recommendation:

"We rate NOKIA CORP (NOK) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Powered by its strong earnings growth of 88.23% and other important driving factors, this stock has surged by 73.74% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 88.3% when compared to the same quarter one year prior, rising from -$1,276.81 million to -$149.37 million.
  • NOKIA CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, NOKIA CORP reported poor results of -$1.10 versus -$0.41 in the prior year. This year, the market expects an improvement in earnings ($0.05 versus -$1.10).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Communications Equipment industry and the overall market, NOKIA CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio of 1.01 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, NOK maintains a poor quick ratio of 0.92, which illustrates the inability to avoid short-term cash problems.
  • You can view the full analysis from the report here: NOK Ratings Report

TheStreet Ratings team rates MICROSOFT CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate MICROSOFT CORP (MSFT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, attractive valuation levels and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 15.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • MSFT's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.65, which clearly demonstrates the ability to cover short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Software industry and the overall market, MICROSOFT CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 36.42% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MSFT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • You can view the full analysis from the report here: MSFT Ratings Report

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