JP Morgan Reviews Nokia's 'Weak' Earnings

In a report published Friday, analysts at JP Morgan said that

reported weak 1Q15 results due to weak gross margins in its networks segment. The weak margins were, in turn, driven by less high margin software in the mix, along with more sales of lower margin network implementation. The company mentioned that the low networks gross margins were also due to higher expenses related to strategic entry deals and difficult market conditions. The weak networks margin also led to the lower than expected EBIT, although the sales figures beat the estimates. "Even though there were one offs in Technologies, the underlying result in that business and in HERE maps exceeded expectations," the analysts stated. Nokia's group opex was higher than expected, largely due to higher expenditure on R&D. The technologies division, however, posted strong sales, 30 percent higher on a year-on-year basis, which in turn led to the higher than consensus EBIT. Sales at the HERE division were also higher than expected. According to the analysts, "Nokia continues to expect YoY growth in HERE sales but now expects higher HERE EBIT margin." In addition, "Nokia continues to expect Technologies division sales to grow YoY… Technologies opex for FY15 is still expected to be in line with opex run-rate in 4Q14," the analysts reported.