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A change of tone: is Nokia the next turnaround stock?

Posted: , by Victor H.

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A change of tone: is Nokia the next turnaround stock?

Introduction

Nokia has been through some very tough times in 2012 catastrophically losing market share and quickly giving away its leading positions in smartphones. But after a nearly $3 billion loss and massive layoffs in 2012, the company is finally starting to emerge stronger and healthier in 2013.

The last quarter of 2012 finally brought the company to profitability but was not enough to make up for the huge losses in earlier quarters and the company ended the year deep in the red. And while we expect a bumpy start of 2013, the company has finally got its cards stacked to its favor.

Moreover, with its shares relatively low and 2013 being truly a make or break year, Nokia is both a risk and a huge investment opportunity.

The ‘top-down’ strategy and Nokia’s monopoly on color

A change of tone: is Nokia the next turnaround stock?

To understand Nokia’s strategy, we need to look no further than its very consistent CEO, ex-Microsoft’s Stephen Elop. We can argue all day he hugely mishandled the transitional period for Nokia, making it extra hard, but for better or worse, that’s all over now.

The Nokia chief executive does not shy away from explaining Nokia’s ‘top-down’ device strategy. The company is first releasing an advanced flagship phone like the Lumia 920, a high-margin device, which then sets the tone for Nokia’s more affordable devices. Most tech companies have the same strategy and Samsung is a glaring example releasing affordable Galaxy S III look-alikes all throughout 2012.

Nokia however employs a richer design allowing much more versatility. Interchangeable covers, different, colorful models, glossy and mat designs, variety. That tone is clearly distinct on today’s market - colorful devices with great design that appeals to a huge number of people. And that could turn out to be to Nokia’s great advantage. The company might not have a patent for color, but it certainly holds the monopoly on it in the phone space right now.

Closing the gaps: Nokia Lumia 720 and Lumia 520

A change of tone: is Nokia the next turnaround stock?
The company has said it itself when it announced the adoption of Windows Phone in February 2011 -- it was about to take two years to fully transition. Good news is, Nokia is right on time. We can tell by two important recently launched devices - the Lumia 520 and the Lumia 720.

Nokia now not only has all price tiers covered, it is covering them with uniquely designed no-compromise devices. The Lumia 520 hits the lowest price points and looks very competitive with its large-for-the-class 4.0-inch screen and 512MB of RAM that translate into support for all mainstream apps including Skype.

The Lumia 720 is the company’s heavy mid-range hitter emphasizing on a brilliant camera in an affordable device. It also supports wireless charging (as far as we know, it is the only mid-range device to do so) via additional covers. It’s got a vivid 4.3-inch display which we tend to think is the close to being the perfect size for single-handed use, a microSD card and a thin profile.


What’s next

So right now, Nokia’s lineup looks very solid, covering all price tiers with unique devices. However, it is the near future that holds a lot of excitement for Nokia.

We have heard from various sources and we have no reason to doubt it: the killer cameraphone is coming and it will be made by Nokia. Codenamed Nokia EOS this yet unconfirmed mysterious device aims to bring an 808-grade camera to Windows Phone. And by 808-grade we mean a much bigger than standard sensor and great quality optics. If we go full-on with speculations, we would hope (guess) to see it around May when rumors say the next big Windows Phone update, GDR2 will get released. The device is said to be coming exclusively to AT&T in the United States.

Then we have the rumored Nokia Laser, a Lumia 920 variation, coming exclusively to Verizon. This handset is expected to get a huge marketing push by Microsoft, and having it on the nation’s largest carrier is definitely an important milestone.

Finally, we have the Nokia Catwalk rumor. That device is expected to first land on T-Mobile and it is said to be a hugely important launch. The reason? It will kick off a new design cadence for Nokia. After nearly two years of colorful plastic, Nokia will adopt a new square-edged aluminum design language that we expect to quickly start spreading to more affordable devices. We can only hope Nokia keeps its attention to color there too.


Carrier exclusivity: the wrong strategy?

Finally, we have to admit Nokia’s hard work to fill all the gaps in its portfolio, but we still cannot fully comprehend Nokia’s weird approach to markets. Right now, Nokia has chosen to sell its flagship devices exclusively on a single U.S. carrier. For the Lumia 920 it is AT&T.

That seems to go against all sound logic. Apple was the only company we can remember in the recent past selling its iPhone exclusively to AT&T, and it was because of limitations. As soon as Apple could (and the carriers agreed), it started selling its iPhone on Verizon and Sprint (soon on T-Mobile). That has been a huge boost for iPhone sales, as right now, with Verizon and Sprint, overall U.S. iPhone sales nearly double in volume.

Why is Nokia arbitrarily deciding to limit its flagship device presence on a single U.S. carrier is beyond our understanding, but we hope this changes soon.


Windows Phone: a stumbling block or the cornerstone?

A change of tone: is Nokia the next turnaround stock?

With all that, Microsoft should be definitely happy to have such a devoted and exclusive partner like Nokia. But can the same thing be said about Nokia? Not so much. Microsoft might be pouring $250 million cash injections to help alleviate the pains from the transition to Windows Phone for Nokia, but it’d better look in its own back-yard. It’s time to call it out. After nearly two and a half years since it first launched Windows Phone lacks not just the apps - it lacks a versatile notification system and customization options.

Live Tiles can only go so far when you have to scroll through an endless list of apps with not even a grid display option to make your life easier.

Let’s make it clear - Windows Phone has got suave transitions, a consistent user experience and some very healthy requirements like a mandatory camera shutter key, but it needs to step notifications and customization up a lot.

We will not sing the app mantra again, but it’s worth once again pointing out that Microsoft definitely needs to work tirelessly with developers to cover the basics. We are still waiting for our Dropbox native application for Windows Phone, and games like Real Racing 3 would really help convince consumer into buying devices.


Conclusion

Despite the difficulties ahead, Nokia is about to soon fully conclude its transition to Windows Phone. It won’t show immediately, but we expect Nokia to present itself to customers with a full portfolio of Windows Phone devices around Q2 2013 and start steadily growing its Windows Phone sales from around Q2/Q3 2013.

Interest in Nokia’s stock is high right now, but if that growth materializes, we wouldn’t be surprised to see investors jumping back on the previously deserted Nokia stock. And with optimistic investors the stock has a huge growth potential.

Should you rush to buy Nokia stock right now? We can only say that its latest devices spur a lot of optimism. And that’s plenty of food for thought, isn’t it?

48 Comments
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posted on 01 Mar 2013, 07:29 24

1. rodkurt (Posts: 128; Member since: 29 Nov 2012)


sleek designs and powerfull mid-range phones...nice

posted on 01 Mar 2013, 07:43 3

6. tusshharish (Posts: 342; Member since: 23 Oct 2012)


elop ia an a**...............

posted on 01 Mar 2013, 07:54 14

10. No_Nonsense (Posts: 826; Member since: 17 Aug 2012)


He's a CEO, so he knows how to handle a company better than you. Although he should have handled the transition better.

posted on 01 Mar 2013, 13:48 2

30. yuvananda (Posts: 9; Member since: 18 Jun 2012)


Nokia Nexus would had been a dream transition!!!

posted on 01 Mar 2013, 15:08 4

34. ZeroCide (Posts: 778; Member since: 09 Jan 2013)


Oh no! not anouther nexus.

posted on 03 Mar 2013, 22:09

47. MC1123 (Posts: 1256; Member since: 12 Nov 2012)


the real nokia that people know is the best in hardware and software and will not use other's software!!

WP is not nokia's .... symbian and meego/maemo is!

do you know that WP plan isnt working as plan? it is already 2 years after transition yet they are still down...and still symbian has a respectable 5-6% market share even they announce 2 years ago that they will kill symbian... WP is still at 2%!! and i think 2 years is enough for WP to have 10% share...

the only thing that make me hate nokia the most is that why kill symbian and meego?! i understand killing meego because it has no ecosystem but its not acceptable just to end it then and there!! look at what BB10 achieve, 70,000 apps at release, nokia just need to support its platform and devs! a lot reviewed N9 as the next big thing! but what did they do, MSFT and NOK partnership!

while symbian, they should continue it!! they cant compete with android on low end if they use s40! only symbian that is comparable to android in terms of customization... WP and iOS dont have that... and symbian dont require high end specs thats why it is suited to be a low end OS!

thats why elop is a real A$$

posted on 01 Mar 2013, 18:25 1

36. Tutut.tukang.Kentut (Posts: 3; Member since: 01 Mar 2013)


AGREE.... btw, this article looks like a paid advertisement for ELOP.

WHAT ELOP DOES IS...
HE SUCCESSFULLY..... I repeat.... SUCCESSFULLY.... migrate the symbian user to Android...

the only problem for him were, nokia were not building any android phone.

posted on 01 Mar 2013, 07:32 4

2. No_Nonsense (Posts: 826; Member since: 17 Aug 2012)


Agreed Victor. The carrier exclusivity is total BS. The challenge for them is to get Symbian users to the Lumia line (not going to happen unless MSFT work hard enough to make WP capable enough for Nokia's hardware innovations and bridge the missing feature gap between Symbian and WP), though I personally feel this may be the year in which it happens. Also, the new "we focus on US market, while we feel other strongholds like Philippines, India, MEA can lick our boots" is totally wrong. Not going to deny that the US is a very very important market, but I think I concur with Jolla's strategy on working on China, Finland and other emerging markets and then then going to the US one. The new Lumia's are awesome though I feel there should have been 3 devices instead of 5, the cross between 620/520 & 720/820 and the 920.

posted on 01 Mar 2013, 18:27 1

37. Tutut.tukang.Kentut (Posts: 3; Member since: 01 Mar 2013)


The problem with WP were the user don't want the live tiles.
Live tiles is so distracting and un cool.

btw,
elop/nokia has SUCCESSFULLY migrate 98% of symbian user to Android. Nokia only problem were nokia didn't make any android phone.

posted on 01 Mar 2013, 19:50

41. microsoftnokiawin (Posts: 1178; Member since: 30 Mar 2012)


i personally think that they're making it carrier exclusive because they've shut down alot of factories and they're hardly be able to keep up with demand if they don't do that

posted on 01 Mar 2013, 07:39 7

3. tiara6918 (Posts: 2075; Member since: 26 Apr 2012)


If the new strategy of Nokia is a carrier exclusive device then that is totally wrong. They shouldn't make an offer that is only few and limited. They should give out more options

posted on 01 Mar 2013, 14:57 1

33. Droid_X_Doug (Posts: 5993; Member since: 22 Dec 2010)


Carrier exclusivity as a strategy has to be the stupidest strategy imaginable. You basically give the middle-fingered wave to ~75% of cellular subscribers so that you can maybe get what, 3% market penetration in the carrier you have the exclusive with? Nokia isn't going to get many iSubscribers to switch. Same for Android.

The management team at RIM/BB should pray that Nokia keeps the carrier exclusive strategy in place. That is the only thing keeping them viable.

posted on 01 Mar 2013, 07:41 3

4. dr_fajardo12 (Posts: 118; Member since: 26 Aug 2012)


good articule. 100% with you guys. we'll see that in the future

posted on 01 Mar 2013, 07:42 3

5. applesauce (banned) (Posts: 165; Member since: 26 Aug 2012)


Thanks for writing this Victor. Did Michael H help? Maybe it will alleviate some of the disdain some folks have for you around these parts.

I personally think Nokia is almost a must-own stock right now. Heck, one could get 100 shares of Nokia for one apple stock,.amd be more likely to make money.

posted on 01 Mar 2013, 07:47 5

7. PhoenixWright (Posts: 102; Member since: 11 Feb 2013)


I like Nokia, Period. but I did not expect the EOS to be designed like that. Hope It's just a rumor/leak. I actually liked the 808 look with its curves and hump better than this. Ambivalent :/

posted on 01 Mar 2013, 07:53 3

9. Victor.H (Posts: 678; Member since: 27 May 2011)


That is just a render. It actually probably won't look anything like that.

posted on 01 Mar 2013, 08:16 1

15. PhoenixWright (Posts: 102; Member since: 11 Feb 2013)


Wew, that's good to hear :D
The only thing that could compliment AND would make the 41MP lens better is a built-in protective cover [be it manual or automatic], It's probably one turn on :D

posted on 03 Mar 2013, 23:46

48. jsdechavez (Posts: 731; Member since: 20 Jul 2012)


Don't care what it looks like..as long as eos camera works like the 808 camera

posted on 01 Mar 2013, 10:21 2

24. ABDULGHAFOOR (Posts: 104; Member since: 04 May 2012)


Nokia EOS pic is Awesome

posted on 01 Mar 2013, 07:47 4

8. avin007 (Posts: 139; Member since: 28 Feb 2013)


That white lumia phone at the top looks hot....

posted on 01 Mar 2013, 07:59

11. satydesh (Posts: 71; Member since: 22 Nov 2011)


i too see on rising tide!!!

posted on 01 Mar 2013, 08:02 2

12. imsickwithsmartphone (Posts: 153; Member since: 28 Jan 2013)


I like Nokia but it just that they should not focus only on one mobile platform..

posted on 01 Mar 2013, 08:10 4

13. Shubham412302 (Posts: 432; Member since: 09 Nov 2011)


the point I love is that each device will be updated for at least 18 months.
which is just like nexus

posted on 01 Mar 2013, 08:13 1

14. nikenturd (unregistered)


Nokia made a huge gamble and they lost.....I dont fell any sympathy for these losers....they couldve gone 100x more successful with Android

posted on 01 Mar 2013, 08:43 2

16. No_Nonsense (Posts: 826; Member since: 17 Aug 2012)


And what makes you think that? The last time I checked, the only manufacturer making any significant profit from android was Samsung. So what's your point?

posted on 01 Mar 2013, 08:47 2

17. freebee269 (Posts: 539; Member since: 10 Aug 2012)


The fact that you went eccentric with your 100x more successful comment discredits everything else you said.

posted on 01 Mar 2013, 08:56 6

19. fly2click (Posts: 41; Member since: 19 Oct 2012)


I disagree. Symbian was the most successful Mobile Operating system to date.

posted on 01 Mar 2013, 11:42 1

25. haseebzahid (Posts: 1853; Member since: 22 Feb 2012)


hahaha please cry us all a river of ignorance cuz you are steamrolled i guess

posted on 01 Mar 2013, 08:47 2

18. windroid (unregistered)


Would be interesting if they open another door to use FireFox OS for the entry line models (replacing Asha OS). In this situation if FireFox starts to gain traction they already have some basis.

posted on 01 Mar 2013, 13:43

29. faisal8708 (Posts: 104; Member since: 15 Nov 2011)


they bought Smarterphone few years back a company which used to make OS for feature phones so in future we might also see Asha series evolve to something close to a smartphone

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