Nokia Corporation (NOK - Analyst Report) displayed strong sales growth in the first quarter of 2015. In Apr 2014, the company sold its struggling mobile phone business to Microsoft Corp. (MSFT - Analyst Report). Post-divestiture, Nokia’s Network division has become its core growth area.

In the first quarter of the year, the company reported earnings of €0.05 (approximately 5 cents), in line with the Zacks Consensus Estimate. Quarterly earnings grew approximately 25% on a year-over-year basis.

Revenues grew 20% year over year to 3.2 billion euros (approximately $3.6 billion). Quarterly revenues were higher than the Zacks Consensus Estimate of $3.2 billion. Strong sales in the Nokia technologies division resulted in the year-over-year growth. Growth was witnessed across all the three divisions of the company.

Quarterly adjusted gross margin was 42.5% in first-quarter 2015 compared with 45.6% in the prior-year period. Operating margin declined to 8.3% from 11.4% in the first quarter of 2014. A reduction in profit at Nokia's Networks division hurt results. Nokia exited the reported quarter with cash and other liquid assets of €7,516 million ($8,481 million), down 2.6% sequentially.

Nokia Networks Segment
 
Total revenue was approximately €2.67 billion (approximately $3 billion), up 15% year over year. Strong sales in the North American market boosted revenues. Operating profit (non-IFRS) at the segment declined 61% on a year-over-year basis.

Weak software sales, apart from challenging market conditions, were primarily responsible for the sharp decline in profits at Nokia’s main unit. The reduction in profit at Nokia's Networks division disappointed investors and shares fell significantly in early trading
 
HERE Segment
 
Quarterly total revenue was €261 million (approximately $294.5 million), up 25% year over year. The revenue growth was attributable to strong sales of new vehicle licenses for embedded navigation systems. Operating profit (non-IFRS) at the segment expanded 90% on a year-over-year basis.

Earlier this month, the company had announced that it is looking to sell its HERE segment. Consequently, the first quarter of 2015 is expected to be the last quarter where the company reports results for the HERE segment. The company is looking to divest the unit to focus instead on its core area of strength – its wireless-network business. The company is also trying to improve its debt rating from “junk” on the back of the sale.

Nokia has also stated that it will buy its French rival Alcatel-Lucent (ALU - Analyst Report) for approximately $16.6 billion to bolster its networks division. The deal is expected to close in the first half of 2016.

Nokia Technologies Segment
 
Quarterly total revenue came in at €266 million (approximately $300 million), up 103% year over year. Operating profit (non-IFRS) at the segment expanded 124% on a year-over-year basis.

Outlook for 2015
 
For 2015, adjusted operating margin for the Nokia Networks segment is projected around the mid-point of the long-term range of 8% to 11%. Adjusted operating margin for the HERE segment is now projected in the range of 9% to 12% (old guidance: 7% to 12%).

Net sales at all the three divisions are projected to increase in 2015 on a year-over-year basis. Management anticipates capital expenditure of €250 million (for the company as a whole) for 2015.

Zacks Rank

Currently, Nokia has a Zacks Rank #3 (Buy). A well-ranked stock in the industry is Juniper Networks, Inc. (JNPR - Analyst Report), which sports a Zacks Rank #1 (Strong Buy).