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Why Did Nokia’s Share Price Slide Yesterday?

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Disappointing 1Q16 results

Europe’s (EFA) Nokia (NOK) announced its 1Q16 results on May 10, 2016. It reported non-IFRS (International Financial Reporting Standards) revenue of $5.6 billion. The non-IFRS diluted EPS (earnings per share) for 1Q16 was 0.03 euros. The earnings reflected the acquisition of Alcatel-Lucent (ALU). It resulted in a higher share count as well as higher non-IFRS tax expenses due to unfavorable changes in the regional profit mix.

In comparison, analysts estimated EPS of 0.04 euros and revenues of 6.2 billion euros in 1Q16. The decline in revenue was primarily attributed to mobile network weakness in 1Q16.

Regional performance in 1Q16

In 1Q16, revenues from North America fell 17% YoY (year-over-year). Sales in the Middle East and Asia-Pacific fell 6% and 5%, respectively. Sales from China (FXI) also fell 5% YoY in 1Q16.

Shares of Nokia fell 6.7% on May 10, 2016, due to disappointment during 1Q16. However, Nokia’s CEO, Rajeev Suri was optimistic in regards to the firm’s performance in 2016. He stated that “Looking beyond financial performance, I am confident that our integration work is proceeding well, that we continue to innovate and target new areas of future growth, and that we are executing well against our strategy for our Networks business as well as for Nokia Technologies.”

Shares of peer companies such NTT Docomo (DCM) and Oracle (ORCL) rose by 4.1% and 1.7%, respectively, on May 10, 2016.

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