Time to Keep an Eye on Nokia

Nokia (NYSE: NOK  ) has finally decided to ride the Chinese dragon toward revival. About time, I say!

After introducing Microsoft's (Nasdaq: MSFT  ) Windows-based Lumia line of smartphones in European and Asian markets, the company recently announced its plans to venture out into China as well. The initial plan is to sell Lumia phones through China Telecom with its 126 million-strong 3G subscriber base and later move on to China Unicom and the nation's largest wireless operator, China Mobile.

According to IDC, Nokia's share in worldwide mobile phone shipments declined from 30.7% in the fourth quarter of 2010 to 26.6% for the same period in 2011 -- a far cry from the 40% it held way back in 2008.

So, is China the key to the revival of Nokia's fortunes? Let's find out.

Riding the dragon
Going by the available figures, that seems a distinct possibility.

China is the world's biggest mobile-phone market, with the number of users close to a staggering 1 billion. According to IHS, smartphone sales in China are expected to top 120 million units this year, an astounding 85% jump from last year's figure of 65 million units.

But Nokia has also made a conscious effort on its part to customize the phones to suit the Chinese audience. The company has formed ties with online China-based companies such as Baidu, SINA, Sohu.com, Renren, and Tencent to incorporate their services and develop localized applications for its devices. But that wouldn't come without...

Competition abound!
That's right -- competition. Nokia's share of the smartphone market in China fell from 42% in the first quarter last year to just 20% in the fourth quarter, and it lost the No. 1 crown to Samsung in the process. At the same time, Google's (Nasdaq: GOOG  ) Android-powered range of phones is fast becoming a force to reckon with in China. In fact, Android-based devices accounted for 56% of the Chinese market last year. It would be interesting to see how Microsoft's Windows-based mobiles measure up to the competition.

And that's not the end of it, as Nokia would need to watch out for other smartphone makers, such as Samsung, ZTE, and HTC, which are in the process of introducing their own Windows-based smartphones.

The Foolish bottom line
Nokia's survival in the near future largely depends on how it performs in China. The company's strong sales network, coupled with its strong brand loyalty in China, should work in its favor.

Nokia might be on the verge of a turnaround through Lumia's debut in China, but there are more opportunities out there for you, too. You can take a good look at some of these by accessing The Motley Fool's free report: "The Next Trillion-Dollar Revolution." You can access this report for a limited period by clicking here -- it's free. Get it before it's gone!

Add Nokia to your Watchlist. It's free.

Fool contributor Keki Fatakia does not hold shares in any of the companies mentioned in this article. The Motley Fool owns shares of Microsoft and Google. Motley Fool newsletter services have recommended buying shares of Nokia, Baidu, Google, Microsoft, Sohu.com, SINA, and China Mobile, as well as creating a bull call spread position in Microsoft. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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  • Report this Comment On April 10, 2012, at 3:35 PM, DAG1996MF wrote:

    Good article thanks. Something else most of the pundits forget to factor in... China is likely to be more friendly to Nokia's commerce efforts for one of the same reasons it's not as friendly to Apple and others... Nokia is not an American company. In Nokia's current position, every little advantage will help... even if it's just perceived.

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