A Finnish multinational communications and information technology corporation headquartered in Keilaniemi, Espoo, Finland, who ventured into a strategic partnership with Microsoft (NASDAQ:MSFT) in Februay 2011, and subsequently unveiled its first Windows Phone handsets, the Lumia 710 and 800, in October 2011, Nokiaisthe world's largest vendor of mobile phones from 1998 to 2012.
However, over the past five years it has suffered declining market shares as a result of the growing use of smartphones from other vendors, principally the Apple (AAPL) iPhone and Google Inc.,(GOOG) devices running on Google's Android operating system.
Nokia fell behind rivals in the fast-growing smartphone market and has fought to catch up, racking up more than 3 billion euros in operating losses in the last 18 months which compelled the company to cut 10,000 jobs, as well as sell assets.
According to its Q2 earnings report, Nokia expects its non IFRS Devices & Services operating margin in the third quarter 2012 to be "similar to the second quarter 2012 level of negative 9.1% plus or minus four percentage points.” Devices & Services accounted for about 53% of total revenue in Q2, so Nokia is really predicting more big losses to come in Q3.
Nevertheless, the key for Nokia is what happens after Q3. Currently, there are some signs that things are turning around at Nokia, although they can be attributed to Nokia just bouncing back from a very low level. In Q2, Location & Commerce and Nokia Siemens Networks had positive non-IFRS operating margins of 14.5% and 0.8%, respectively.
In comparison, in the previous quarter Q1, Location & Commerce and Nokia Siemens Networks had non-IFRS operating margins of 12.9% and -5%, respectively. However, Nokia’s revival is completely dependent on a comeback in smartphones.
Nokia has three main businesses: Devices & Services, Location & Commerce, and Nokia Siemens Networks. Devices & Services sells smartphones and feature phones. Location & Commerce focuses on the development of the Nokia Location Platform, which includes Nokia Maps. Nokia Siemens Networks focuses on providing mobile broadband infrastructure to customers.
Industry sources stated on Thursday, September 6, 2012, that Nokia had cut the prices of its older smartphones in a bid to boost demand until its new phones reach the market. Analysts expect the Finnish firm to lose another 700 million euros in the July-September quarter and to sell around 3.6 million Windows phones, down from last quarter; Samsung sold more than 20 million Galaxy S3 smartphones in just 100 days.
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As revealed, Google’s Android extended its dominance to 68.1% in Q2. Apple’s iOS is second at 16.9%. Together, Android and iOS accounted for 85% of the market, not leaving much for the rest of the competition. Nokia’s Symbian OS continued its decline. Solid increases in shipments of Microsoft Windows phones, which grew to 5.4 million shipments and a 3.5% market share, offset the decline. Nokia is the main vendor of Windows phones. In Q2, Nokia shipped 4 million Lumias, which is up from around 2 million in Q1.
Samsung has become the world's biggest smartphone maker as Nokia's share of the market has fallen to less than 10 percent, tumbling from 50 percent during its heyday prior to the iPhone’s launch in 2007.
Nokia will start selling the Lumia 920 in November, possibly its last chance to break into the most profitable part of the mobile phone market and secure its future; the Lumia 920, which uses Microsoft's Windows software, is Nokia's bid to catch up with Apple's iPhone and a string of popular phones using Google's Android software, such as Samsung's Galaxy models.
Lumia 920 has a 332 ppi super sensitive 4.5 inch touch-screen display. By “super sensitive,” it means that the phone can be used while wearing gloves. It comes with LTE, wireless charging, and NFC. The 920 comes with a dual core 1.5 GHz Snapdragon S4 and an 8.7 Megapixel PureView camera. CNET has a good review of the phone. Basically, the Lumia 920 is a smartphone that can slug it out with the best. If the camera is as good as Nokia claims (it does have an f/2.0 relative aperture), it could perhaps be the best smartphone on the planet when it is released.
While some retailers said they would center their attention on the new iPhone and rival models, others were more positive.
"It looks really good, they chose to differentiate with the design and appearance, which are very important to people. The camera technology is very interesting," said Sami Aavikko from DNA Finland, Nokia's home market third-largest carrier.
Ernest Quingles, managing director for Italian distributor Tech Data, said he expects the new Nokia devices to be successful, but questioned whether Windows Phones can attract as much interest from developers as Android and the iPhone.
"What we need to check still now is how Microsoft and Nokia will be able to develop the apps part," he said. The limited success of Windows phones so far relates to the fact that they support only 100,000 or so apps, compared with about 500,000 or more for Android or iPhones.
Apple and Google's well-established positions mean consumers have invested heavily in apps and content with them, and that could discourage switching to a new mobile system. Currently, a great number of people are still using feature phones. In Q2 2012, feature phones accounted for 62% of total mobile phones shipped.
For the third spot in the smartphone market, Microsoft and Nokia have the advantage because Windows 8 is going to be launched on October 26, 2012, while, Research In Motion (RIMM) has BB10 pegged for the beginning of 2013.
In conclusion, the Lumia 920 is competitive against the best smartphones. The Lumia 920 has everything buyers look for in a flagship smartphone, with its powerful processor, NFC, super sensitive display, and wireless charging, a fastidious additional feature. Further, the Windows 8 Phone OS provides major upgrades to Windows 7.5. Overall, the Lumia 920 has a good shot at selling well.
For investors who believe in focusing on fundamentals; who only purchase stocks that they believe are trading under their essential value and who like high risk high reward plays, Nokia is a worthy investment.