No Longer Negative On Nokia
seekingalpha.com 
May 18, 2012 | 26 comments | about: NOK, includes: AAPL, GOOG, MSFT
 Before the last Nokia ( NOK) earnings report, I wrote I was turning negative on Nokia because the fast implosion of Symbian could not possibly be compensated by the rise of the Microsoft ( MSFT) Windows Phone-based Lumia smart phones. I also said that a glut in smart phones and the emergence of cheap Google ( GOOG) Android phones was going to make this trend away from feature phones harsher still. This was in evidence when Nokia reported horrendous earnings. After those earnings, I reiterated that I remained negative. That the path after those earnings was more likely down than up. That too came to pass.
I am writing today, though, to say I am no longer negative. It's not that I don't expect further deterioration. I do expect that deterioration in Nokia's feature phone division. But at the same time, we should now start seeing Lumia gaining critical mass. And as a result, instead of Nokia always showing lower market share in smart phones, it's quite possible that it will start reporting rising market share. Given where Nokia trades ($2.85), that should be enough for the market to overlook further deterioration. Also, looking forward Nokia will have a couple of things going for it:
One is that it clearly still knows how to make phones, so when Windows Phone Apollo removes the hardware shackles, it's likely that Nokia will manage to build a competitive super phone;Another, is that the Windows Phone still looks quite distinctive. Even Steve Wozniak, an Apple ( AAPL) co-founder, said as much. There seems to be reason to believe that Android is completely lacking brand appeal. This is important, because it means Windows Phone can clearly conquer a decent share of the market, under that circumstance, especially with the planned onslaught of Windows 8 devices.Conclusion
It no longer makes sense to remain negative on Nokia. Although the news flow on feature phones is sure to remain negative, the news flow on smart phones - what really matters - is bound to turn positive. While I'm not prepared to say Nokia is a buy here, it no longer looks like something to avoid. Maybe for those of a more speculative bent, it could even be a buy. The problem with the smart phone glut, though, remains.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in NOK over the next 72 hours. |
