Nokia is releasing their first quarter earnings tomorrow and the market seems to be holding its breath. Nokia is one of the first big companies to release, and everyone wants to see how the telecom giant is doing. We know the economy is slowing, but how much? We expect corporate profits to slow, but how much? We’ll get our first glimpse tomorrow.

Analysts are across the board on their expectations. The lowest EPS I’ve seen is .33 and the highest is .41. The “average” expectation is probably around .37, although I’ve seen various outlets claiming an average expectation of anywhere between .35 and .38. Last year Nokia managed .25, so everyone is expecting earnings to increase. We’ll see.

Bloomberg also has a nice story about the expectations.

In recent years Icelandic financial institutions have been happily buying up competitors throughout Scandinavia. Iceland was a happy destination for carry trades because they had much better rates than other areas.

All that has changed. In recent days S&P and Fitch have downgraded soverign debt. The Icelandic crown has been hammered against the euro. Big banks, like Kaupthing, Glitner and Landsbanki have seen their stocks plummet.

The Prime Minister is claiming that hedge funds and speculators have launched an attack on the currency, reminiscent of the UK pound or Hong Kong dollar in years past. Meanwhile, the inflation rate has leaped to 8.5% and interest rates have been jacked to 15% in an attempt to stabilize the currency and get inflation back under control.

It will be interesting to see how this all plays out. The mainstream press hasn’t been very interested in this story, but it has wide implications for the Scandinavian financial markets.

Central Bank of Iceland

Bloomberg article

BBC article

Financial Times article

Bank of Finland cuts growth forecast for 2008 

 

Danish construction industry loses confidence 

 

Bear Stearns collapse is hurting midtown Manhattan bars

I recently had the great good fortune to meet Tapani Järvinen, the President and CEO of Outotec. I interviewed him for an upcoming article in the Helsinki Times newspaper and thoroughly enjoyed meeting him.

Mr. Järvinen is now on sick leave for four weeks, according to a press release by Outotec.

He is friendly, informative, and has a very uncanny business instinct. It is always fun to meet people like this, because you hope some of that business genius will rub off. Mr. Järvinen went out of his way to give me great information for the article, and the photographer and I were delighted at how good he was at being interviewed and photographed.

I hope he gets feeling better soon. I’m sure everyone at Outotec is already missing his enthusiastic energy. So get well soon, Mr. Järvinen.

By the way, the article hasn’t been published yet but I will let you know when it hits the newsstands.

Photo courtesy of Outotec.

As regular readers know, I’m not too fond of governments owning corporations. Personally, I think governments should be investing in education and infrastructure, for instance, instead of insurance or real estate companies.

Most of the Scandinavian governments have a long history of ownership in private corporations. Sweden is trying to gradually sell off some of their stakes, and Finland is doing the same.

Jyri Häkämies, pictured above, is the Minister of Defence for Finland. He also gets to oversee the three classes of government ownership in corporations. Those classes include 1) companies that need to be owned because of legislation (like alcohol sellers), 2) companies that may have national defence implications (like oil or airlines), and 3) companies that the government shouldn’t be invested in anyway (like insurance or steel manufacturers).

Last week shares in Outokumpu soared on speculation that Finland was going to sell off it’s 30% stake to ArcelorMittal. Outokumpu rose about 8% more than the Helsinki index did as a whole, leading me to believe that 1) there may be some speculation for a whole bid for Outokumpu, or 2) there is a discount in the prices of companies that have large government stakes.

It is probably a bit of both, but on further examination I was rather surprised to discover that most companies I follow that have a large government ownership stake are a bit undervalued compared to those in the industry that don’t have a government shareholder. This bothers me, for obvious reasons.

I don’t know if the rumours about Outokumpu and ArcelorMittal are true or not. But I hope that the government does sell their stakes in companies they have no business owning in the first place. €24 billion would build a lot of schools and roads.

Disclaimer: I have an ownership stake in Outokumpu, so there might be some conflict of interest in my opinion. Nothing against Mr. Häkämies, who I think is doing an admirable job, but I would prefer to share ownership with other private entities that have the same desire for business success as I do.

Photo courtesy of the Prime Minister’s Office / Lehtikuva Oy.

Kids shouldn’t eat too much junk food. Right? So maybe in an effort to make children healthier schools should remove all candy from vending machines and only offer healthy snacks. Various education administrators throughout Scandinavia have pushed for this. In Finland, I believe the push started almost exactly a year ago. But don’t be convinced that this regulation will solve the problem. When there is a demand for a product, there will be a supply. That is basic economics.

I was rather amused to read about some enterprising students who started a black market selling candy in an American school that had banned the sale of junk food. This isn’t surprising, if we think about it. Drugs, prostitution, even snus - if the government bans it the market will find a way to supply it.

When is the best time to buy? When everyone else is selling. The good folks over at Nordic Capital understand how the game is played. While everyone else thinks that the sky is falling and all stock prices are falling like rocks, Nordic Capital (through Cidron Services) have decided that the time is ripe for taking TietoEnator private.

TietoEnator has had a bad year. Bad news and a loss of confidence has pushed their stock price down over 25% since their 31 December close of €15.36. It has been one of the worst performers of the Nordic indices. Nordic Capital is offering about €15.50 per share and is planning on putting in ex-Sonera head Harri Koponen as CEO. TietoEnator has rebuffed the unsolicited offer, pointing out that the price was only a 6.2% premium over the six-month average price. Nordic Capital highlighted the fact that it was a 38% premium over the 19 March price. And, as you can see, the price is barely over what it at the end of 2007.

Nordic Capital is putting up some money itself, while Nordea, Pohjola and Swedbank is lending it the rest. The price closed today at €15.99. I suppose some investors think the offer might be pushed up to convince the Board to play along. I am unconvinced that many others would consider a rival offer at present, but judging from some of the trading volumes I’m betting some arbs were happily snapping up shares.

You don’t often see hostile takeovers while stock prices are falling and liquidity is hard to come by. Evidently Nordic Capital decided it was too good an opportunity to miss. Although it has no bearing whatsoever upon this offer, it is nice to see that there is still liquidity floating around Scandinavia.

The OMX Nordic 40 is down 6.5% since last Wednesday. Financials have been hit extraordinarily hard. To just show a selection during that same time period:

Danske -9.3%

Glitnir -8%

Jyske -8.1%

Nordea -7.5%

SEB -12.1%

Svenska Handelsbanken -7.4%

Swedbank -8.5%

D. Carnegie -11%

Sampo -8.3%

The recent flight from financials was started with the almost-collapse of Bear Stearns. Asian and European markets tanked on the news, but the American markets were much calmer. This encouraged Asia which has been rallying overnight. I expect Europe to do the same today. It’s interesting to watch how this news moves around timezones and different markets feed off each other.

With the huge losses these financials have had in the past week, I wonder if any have become undervalued. Most Scandinavian banks seem to have very strong balance sheets and may have been a victim of over reaction. But obviously it is a risk to go into financials at the moment. Who knows where the next victim of this credit crunch will be found? Will it be another on Wall Street? Or Germany? Norway?

We have been left largely untouched by the global liquidity problems. There has been problems with companies all over North America and Europe, but Scandinavian companies have had few problems. I’ve had a number of conversations with some major players in the credit markets over the past couple of weeks and the story is largely the same: we aren’t seeing any real problems.

But there is some contagion. Some public funds in Norway invested directly in the bundled mortgage securities and got hit. R