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Despite its recent warning on faster than expected sales in the current quarter, Nokia's stock has been upgraded by Goldman Sachs from 'sell' to 'neutral', reflecting a general market sentiment that the Finnish giant has strong survival potential. There are deeper nerves about its infrastructure joint venture, Nokia Siemens, which provided a downbeat forecast for 2009 at the Nokia Capital Markets day last week.

Unlike Alcatel-Lucent, which outlines its turnaround strategy on Friday, NSN has at least finished its merger and restructuring process in time for the downturn, but it is still braced for a decline in the market next year, and only flat fixed and mobile revenues for full year 2008 compared with 2007.

NSN is estimating that the total market will be worth about €115bn ($149bn) this year, roughly the same as in 2007 and 2006. Within that figure, wireline decline has been offset in all three years by growth in infrastructure services, notably managing operator networks, while wireless equipment has remained stable. In 2009, NSN expects the total market to fall in value by 5% to 9% - which would result in revenues of €109bn ($141bn) and €104bn ($135bn). Within that, the make-up will also change, says NSN, which expects services to be flat at around €40bn ($52bn), while both wireline and wireless infrastructure decline.

Against that gloomy backdrop, NSN expects to maintain its current market share as well as protecting its margins, as the effects of its integration process kick in, saving about €2bn ($2.6bn) a year from the end of 2008. This should enable NSN to avoid falling into the red, according to analysts such as the Nomura team, which is forecasting NSN revenues of €4.38bn ($5.7bn) in the fourth quarter of 2008 (down from last year), taking its total revenues for the year to €15.35bn ($20bn) and adding up to market share of 13-14%. In 2009, the Nomura research note predicts 2009 revenues down 7.6% year-on-year to €14.2bn ($18.4bn), and it expects EBITDA of €767m ($994m) in 2008, followed by €529m ($686m) in 2009, with sales and profits improving from 2010 onwards. Positives, they say, include the new restructuring, which may be followed by further, more minor cutbacks, plus an increased focus on software and a refusal to take on loss leading equipment contracts, a decision that should help NSN protect gross margins of around 30%.

Meanwhile, Goldman Sachs upgraded Nokia on the basis that the company has a strong strategy for emerging markets, and a clear understanding of the risks there, plus a "more realistic" management outlook. It also sees reduced risk in the product portfolio, especially with a recovery in the smartphone line-up. Analyst Tim Boddy said in a research note: "While macro uncertainty remains high, we believe that Nokia's 'survivorship premium' is likely to expand if the outlook worsens further", since weaker rivals will struggle to survive. Boddy raised his price target on the stock to €10.5 from €9.5.

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