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Nokia Gets a Taste of Its Own Medicine

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Investors pinning their hopes on a turnaround for Nokia (NYSE: NOK  ) were hit with more bad news today. The world's largest mobile-phone maker issued a profit warning for the company's fiscal first quarter that sent shares tumbling to a 15-year low. However, a weaker sales outlook is just the tip of a very large iceberg.

The Finnish company recently launched its new Lumia 900 smartphone in the U.S., where it hoped it would be met by strong demand. The flagship device is a big step forward for Nokia, because it showcases a partnership with Microsoft (Nasdaq: MSFT  ) , in which the tech companies together are attempting to win back some share of the smartphone market.

So much for a hassle-free phone
However, the Windows-based smartphone that was supposed to spur Nokia's turnaround has a problem with suddenly dropping high-speed data connections. That's particularly embarrassing for Nokia, because it spent months promoting the device with a marketing campaign called the "Smartphone Beta Test," in which it scoffed at glitches in Apple (Nasdaq: AAPL  ) and Google (Nasdaq: GOOG  ) phones.

Apple and Google currently dominate the mobile scene -- together commanding more than 80% of the U.S. smartphone market, according to comScore. That's in stark contrast to Microsoft's 4% share and Nokia's distant 1% claim on the industry. Complications with the new smartphone that was supposed to save Nokia could instead hurt the company if customers return the devices.

A bright side?
If anything positive came out of this setback, it was an opportunity for Nokia to showcase its impressive customer service. The company assured buyers that it would issue a fix for the problem on April 16. In the meantime, Nokia will try to buy consumers' forgiveness by offering a $100 refund to all customers before April 22, even if the bug didn't affect their device. 

These are problems that simply can't happen if Nokia ever wants to make a meaningful comeback. For now, I've lost all confidence in the company's ability to regain market share. Instead of wishing for a turnaround at Nokia, find out what stocks are the three hidden winners of the smartphone revolution in this free report from The Motley Fool. Get instant access to the report -- it's free.   

Fool contributor Tamara Rutter owns shares of Apple. Follow her on Twitter, where she uses the handle @TamaraRutter, for more Foolish insights and investing advice. The Motley Fool owns shares of Google, Apple, and Microsoft. Motley Fool newsletter services have recommended buying shares of Apple, Microsoft, Google, and Nokia and creating bull call spread positions in Microsoft and Apple. The Motley Fool has a disclosure policy. We Fools don't 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.

Read/Post Comments (5) | Recommend This Article (4)

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 April 11, 2012, at 8:11 PM, Jab69 wrote:

    Another bad day for a dying company

  • Report this Comment On April 11, 2012, at 10:33 PM, XMFSocialME wrote:

    Sadly, yes.

  • Report this Comment On April 11, 2012, at 11:01 PM, SUPERMANSTOCKS wrote:

    I do not think they are dying. I do think they need to make some huge changes! I see them hitting about 2.00 a share, and I will be buying more if they do! All I can say is remember Priceline? Everyone thought they were dead at one time. Now look at them!

  • Report this Comment On April 12, 2012, at 2:14 AM, foolishlycuriose wrote:

    Nokia a dying company – unlikely or at least not likely anytime soon given their net war chest of nearly $6 billion. A company in transition, a management team that continues to stumble its way forward, a good product with global brand recognition – yes, yes, and yes. Nokia’s core competence remains manufacturing sturdy mobile devices. Partnering with Microsoft to provide the operating system seemed and still appears to have been a good decision. Software glitches happen and then they get fixed. Will there be others? Maybe/probably but they too will be resolved. Hooking up with AT&T in an exclusive agreement to sell their flagship smartphone may not have been the wisest decision, especially considering the way in which the launch of the Lumia 900 was handled, but the phone is indeed selling - most especially well on Amazon. As to profit forecasts, Mr. Elop and his management team seem to have made it a habit of revising them downward, which is a bit curious and certainly not welcome news by Nokia shareholders. Foolish take – the US is only one market for Nokia. That said three very large companies with lots of cash are investing heavily to launch a third smartphone platform. Success will be measured with a third or even fourth place finish in market share, which is doable and is a very different animal than trying to topple Apple or Google. Furthermore, the Lumia line is selling well in multiple markets and Mr. Elop can always be replaced.

  • Report this Comment On April 12, 2012, at 7:55 AM, jdmeck wrote:

    Is this story on the major news nets... NO. Would it be if it were Apple...YES.

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