Nokia Alcatel merger story draws investors, even as growth fades

Fri Feb 12, 2016 7:57am EST
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* Nokia wireless business growth seen turning negative this year

* Margin gains, shareholder returns seen as reasons to own stock

* Solid Alcatel business trends buys merged firm time-analysts

By Eric Auchard

FRANKFURT, Feb 12 (Reuters) - Nokia's best days of growth may be behind it for the foreseeable future, but what keeps investors on board one of Europe's biggest technology stocks is the progress it is making to deliver more consistent profits and shareholder returns.

It came as little surprise when Nokia warned on Thursday its core mobile business could decline during 2016 as China, its most vibrant market, has largely finished upgrading networks.

Nonetheless, many analysts predict rising margins after Nokia closed its 15.6 billion euro ($17.6 billion) acquisition of Alcatel Lucent, allowing the combined firm to cull many overlapping operations and products.

In its last separate report, Alcatel Lucent produced strong results on Thursday, taking the sting out of Nokia's own cautious outlook.

"Under good management, which I believe Nokia has, the operating margin of Alcatel's side of the business could almost double over the next two to three years," Liberum analyst Janardan Menon said.   Continued...