Did Nokia Just Bounce Off a Bottom?

Almost nothing has gone right for Nokia (NYSE: NOK  ) over the past year. And while third-quarter results were better than expected, the numbers offered very little to cheer about.

Revenue fell 13% to 8.98 billion euros. Adjusted operating profit fell 60% to 252 million euros. Overall, Nokia lost 68 million euros -- far better than the 229-million-euro loss analysts were expecting, Bloomberg reports. The stock rallied more than 6% on the news. Color me concerned.

Why? A slimmer-than-expected loss means nothing when the top line is fading also. Nokia's lone bright spot -- unit sales of dumb feature phones, which rose 8% year over year -- is also where it is most vulnerable as a business.

Think about it. As my Foolish colleagues Ron Gross and Joe Magyer point out here, there's nothing so unique about a Nokia feature phone that can't be replicated by Asian competitors such as Samsung and LG. Meanwhile, higher-margin smartphones are failing to catch on as fast as shareholders would like.

Unit sales of smart handsets fell 38% year over year as Nokia transitioned to a new operating system supplier deal with Microsoft (Nasdaq: MSFT  ) . The first handsets featuring Windows Phone 7 are expected to be unveiled next week.

For shareholders' sake, I hope the new NokiaSoft smartphones prove alluring to buyers. But with Google (Nasdaq: GOOG  ) having just introduced a more advanced version of Android called Ice Cream Sandwich for its forthcoming Nexus Prime handset, and with Apple (Nasdaq: AAPL  ) setting records for sales of its new iPhone 4S handset, a smartphone-fueled recovery isn't likely in Nokia's future.

Do you agree? Disagree? Please let us know what you think about Nokia's prospects using the comments box below. You can also keep tabs on the wireless industry by adding any of these stocks to your Foolish watchlist:

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Apple and Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft, Apple, and Google. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft, as well as creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 21, 2011, at 4:47 PM, Ikarruss wrote:

    Windows 7 is a double risk, not only is it a differnt OS than the establishment, it is one that all establishement thought not worth the bother. Nokia is almost starting form 0 on this.

    The question is ¿Can they pull it off, can they convince us to change our OS?

  • Report this Comment On October 21, 2011, at 11:57 PM, thethreestooges wrote:

    Android is stolen mobile system. Steve Jobs: "I will spend my last dying breath if I need to, and I will spend every penny of Apple's $40 billion in the bank, to right this wrong"

    The world believes Jobs.

  • Report this Comment On October 22, 2011, at 2:11 PM, hary536 wrote:

    Obviously your colleagues Ron Gross and Joe Magyer don't have clue about feature phone business of Nokia, specially in emerging countries.

    I can speak of personal experience based on one of those countries: India.

    It's not just about phones that the sales are dependent, it also depends on after-sales support, which is where Nokia can beat any other Asian manufacturer in India. Nokia is a "trusted" brand, others are not as much. Also, Nokia's build quality is far superior than other Asian manufacturers. You need to do more research than just base your suggestion on superficial knowledge. That's why people don't download lot of your free reports and should not trust your advice always.

  • Report this Comment On October 22, 2011, at 8:41 PM, techfrk68 wrote:

    Having used the iOS and Android and currently using WP7, I can tell you that from a user perspective it is definitively superior. The one gap is in the number of apps but even there the gap is narrowing. More importantly, functionality wise the app coverage is comprehensive. What sets WP7 apart is the live tiles feature. For the critical things in life I dont even need to go beyond my home screen, stocks, currency rates and fb updates for the most important people in my life are pushed to my home screen.

    To anybody criticizing Nokia or MSFT potential, I would say - use it before you abuse it!

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