Nokia Earnings Preview

MARK HAINES, CNBC ANCHOR: Banc of America lifting its rating, the telecom equipment sector, to positive yesterday, naming Nokia (NOK) as one of its top picks. The firm thinks handset stocks will be strong. Global unit sales rise throughout the year. The report comes ahead of Nokia`s annual

Greg, thanks very much for being with us.

GREG TEETS, TELECOM ANALYST, A.G. EDWARDS: Thanks, good morning.

HAINES: First thing I want to ask you about is, because it came up earlier this morning, what about this talk Nokia buys RIMM (RIMM).

TEETS: Well, certainly from Nokia`s perspective, it would provide them with a way to get into a large number of enterprises very quickly. But, you know, it would also kind of lock up RIMM as a custom supplier, so it might hurt RIMM`s prospects for being very independent. And I think from that perspective it may not be as good of a deal for RIMM.

HAINES: Be an expensive buy, too, wouldn`t it?

TEETS: Yes, it would be.

HAINES: OK. So what are you expecting out of this meeting?

TEETS: Well, you know, in general, annual meetings are fairly benign. I think we will see the CEO go through what happened in 2004, talk about what is going on in 2005. And I think really the emphasis will be on what is going on with the product portfolio, how has the company made improvements throughout the year and what to look forward to in `05 and `06.

JEFF MACKE, MACKE ASSET MGMT. What is the near term next trick that these guys have in terms of the -- if we have better-than-expected handset sales all last year, we`ve got issues with the inventory, if we have a slowing growth rate of our handsets or if that is going to take a hit versus last year, what do these guys do to kind of get people reinterested?

TEETS: I think mainly handset makers are already assuming that `05 is a bit slower than `04 was. I mean, `04 was a very good year. And I think naturally we go into the year with a little bit of caution. But I think consumers are still looking for a lot of new features in their phones. I think that `05 is going to be the year of music. We`ve heard from Motorola (MOT) about the iTunes phone. And we were seeing Nokia work with Loudeye (LOUD) to form a partnership that allows you to download songs to your phone. And we`re seeing many new phones that have kind of music-centric features. And so I think that if that catches with consumers, then that will be something that will drive handset sales going forward.

DAVID FABER, CNBC CORRESPONDENT: Now I notice, Greg, that you say 2006 in your most recent report will be the year of video.

TEETS: Correct.

FABER: Explain that.

TEETS: Well, I think 2006 is the year that we see 3G networks really being widespread and being at data speeds, having a wide array of handsets, you`ll have good video cameras in those phones. And so I think that seeing TV to the handsets, those (UNINTELLIGIBLE) competing standards, one from Qualcomm (QCOM), one from the Nokia camp is pretty typical in the circumstances. And so I think you`ll start to see video from -- in the handsets, TV, shows like this that maybe short snippets coming down to the phones. But then also you`ll have full broadcast shows.

FABER: How can you know at this point whether Nokia is going to be able to be in a lead position when video starts to become a lot more available to cell phones?

TEETS: I think you look at what they have been talking about. They have been one of the leaders on DVBH, which is one of the standards. And you continue to look at their portfolios. They have got some media-type devices out that are kind of the first kind of throw-it-up-against-the- wall-and-see-if-it-sticks-type products. And so I think you are seeing those types of things from Nokia, and that`s a good indication that they`re going to be at least in the game when video starts to become a big part of the picture.

FABER: Just looked at five-year stock chart, this thing has been dead money for three years. I mean, what is going to get it moving? What is the real catalyst, then?

TEETS: I think continuing to work on the product portfolio. And it`s been a rough couple of years for everybody in the industry. It has been very competitive. I think we are entering the 3G now which is -- should present a lot of opportunities to add some really interesting features and some nice data capabilities to the phones. And so I think as this becomes very much a consumer business, the companies that can innovate and really provide exciting features and great form factors are the ones who are going to push things up.

HAINES: All right, sir, thank you very much, Greg, appreciate your thoughts. Greg Teets is telecom analyst at A.G. Edwards in St. Louis.

END

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