To many market watchers, it’s a miracle that Nokia (NOK: Charts, News) is still trading today. The company, which was once the undisputed leader of the mobile handset market, nearly hit $1 per share in July, before strongly bouncing back 130% to current levels on hopes that Microsoft’s (MSFT: Charts, News) Windows 8 Phones would restore its ailing Lumia line. Although some investors have profited from this recent rally, Nokia remains a shadow of its former self, with shares trading 90% lower than its all-time high near $40 per share five years ago. Now that the company has survived the impending 2012 doomsday that many analysts had forecast, does it have a chance to turn it all around in 2013?
It’s easy to forget that despite its troubles, Nokia is still the world’s second largest handset maker after Samsung, with a 22.5% global market share. However, that number includes all mobile devices – both standard cell phones and smartphones. Today investors are focused more on smartphone sales, where Nokia trails in a distant seventh place with a 4.3% sliver of the market – a disappointing slide from third place in the previous quarter. Samsung, Apple, Sony, HTC and Research in Motion claimed the top five smartphone market spots, in that order, at the end of 2012.
Surprisingly, Nokia’s new Lumia 920T also sold out within two hours of its debut in China, where it is supported by heavyweight carriers such as China Mobile. The 920 model and its variants are also selling well in Europe and the United States, emerging as an unlikely top seller on Amazon.com (AMZN: Charts, News) and its exclusive U.S. carrier AT&T (T: Charts, News).
Nokia is expected to also gain support from Verizon (VZ: Charts, News), since offering Nokia phones as a viable alternative smartphone would help both Verizon and AT&T gain leverage against Apple and Samsung to negotiate better subsidy deals. Without Nokia’s presence, these two main players in the smartphone field have a firm upper hand against wireless carriers.
Although Nokia has put all of its faith in Microsoft, which is expected to invest heavily into Windows Phone 8 throughout 2013, the commitment is not fully reciprocal. Microsoft is not only forging partnerships with Android heavyweights Samsung and HTC, but also announced that it may build its own smartphone if Nokia’s efforts fail.
Regardless of Microsoft’s negotiations with Nokia’s competitors, Nokia will directly benefit from increased investments in Windows Phone 8. Microsoft has been heavily spending to increase the amount of applications in its Windows Phone Store, which currently offers 150,000 applications. Google Play and Apple’s (AAPL: Charts, News) iOS App Store are currently tied at approximately 700,000 applications.
Investors should also be wary of Research in Motion (RIMM: Charts, News), which is often mentioned in the same breath as Nokia. Research in Motion, which has a new upgrade of its flagship BlackBerry operating system on the way, remains a favorite of enterprise customers, due to its more robust security protocols in comparison to Android or iOS. Several analysts believe RIM could stage a dramatic, unforeseen turnaround in 2013 with the January release of BlackBerry 10.
Nokia CEO Stephen Elop, a former Microsoft employee, managed to slow Nokia’s rapid descent by simply admitting that the company had to change. The Finnish company’s first non-Finnish CEO’s first moves – to abandon Symbian and partner with his former employer Microsoft – were all initially met with widespread criticism and derision. Yet as a result Nokia has emerged leaner and more cost effective, and its shareholders have been rewarded with a small vestige of hope that didn’t exist before.
Although some financial journalists and some analysts have speculated that Nokia may sell its mobile handset division to Huawei, Microsoft or Google (GOOG: Charts, News), Nokia management has denied all these rumors, and adamantly stated that it plans to stay active in the mobile business throughout 2013.
No one is expecting Nokia to stage an immediate recovery in 2013, but a low price-to-sales ratio of 0.3 and a strong dividend yield of 6% should tempt patient value investors. In addition, the company still owns strong core assets, such as its mapping business and patent portfolio. Nokia’s stock price cannot be reliably measured with price-to-earnings, since the company posted six consecutive quarters of losses, but it trades at 0.98 times book value, which means that further downside is extremely limited unless its cash flow completely dries up.
Other News About NOK
Windows Phone Store Doubled in Size During 2012
Despite trailing Apple and Google, Windows Phone Store doubles in size.
Will Nokia Corporation Leave Mobile Industry In 2013?
Rumors circulate regarding Nokia’s future in the mobile industry.
Other Stocks in the News
Apple Wins Top Score for App Store
Apple’s App Store remains the top choice for smartphone users.
Starbucks Announces Much Anticipated Entry into the Dynamic Vietnam Market
Starbucks expands into Vietnam.
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