Nokia Still Stands a Chance

The fortunes of onetime handset king Nokia (NYSE: NOK  ) seem to be steadily sliding downward. This company's cellphone business recently posted an operating loss for the first three months of this year, followed by a lowered outlook for the upcoming quarter, courtesy of rivals such as Apple, whose market capitalization recently touched a breathtaking $600 billion.

Even more worrying is the fact that sales of its low-end handsets in some of the hottest emerging markets such as India, the Middle East, Africa, and China fell by 32% from the comparable year-ago period to $3 billion. But that doesn't mean that Nokia isn't doing anything to remedy this.

Trimming the fat
Since the new CEO took over the reins, the company has announced plans to slash at least 10,000 jobs. Nokia has also shifted its manufacturing base from Europe to Asia in a bid to reduce the cost of production.

In fact, the losses may prompt Nokia to focus on just its smartphone division. Some analysts have suggested that they should exit the low-end phone business altogether. This may not be a bad idea after all, as Nokia's Lumia line of smartphones, powered by Microsoft's (Nasdaq: MSFT  ) Windows operating system, haven't been doing too badly of late, with the company managing to sell around 2 million units during the first quarter. And with Samsung probably surpassing Nokia in sales of handsets for the first three months of this year, it makes sense to focus on just the smartphone arena.

The company may also consider selling some of its intellectual property in order to raise more cash. It might opt for a patent sale deal with Microsoft, given that the two companies have bonded well during the Lumia venture. But that's not all...

The Chinese venture
Nokia also plans to extend the success of Lumia into China, which is great as the country is the world's largest mobile phone market, with the number of users totaling a mind-blowing 1 billion.

The company plans to sell the Lumia smartphones in partnership with China Telecom and its 126 million subscribers, then later move on to China Unicom and China Mobile.

Moreover, Nokia recently announced that it would introduce its own tablet, which would run on Microsoft's newest Windows 8 operating system by the end of the year. So, if Windows 8 can grab a respectable chunk of the tablet universe, Nokia has a better shot at reviving its fortunes.

The Foolish bottom line
With a near-junk credit rating from Moody's, Nokia sure looks to be in dire straits now. However, the company's foray into tablets and its drive to increase sales of its Lumia phones in China might be rays of hope on the horizon.

Nokia may not be a smart investment option right now, and that's precisely why you should take a good look at some other opportunities by getting your copy of 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!

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 Apple. Motley Fool newsletter services have recommended buying shares of Apple, Microsoft, Nokia, and China Mobile. Motley Fool newsletter services have also recommended creating bull call spread positions in Microsoft and Apple. 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.


Read/Post Comments (4) | Recommend This Article (8)

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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 24, 2012, at 1:03 PM, nai1sirk wrote:

    Sorry, but two million Lumia phones are not concidered a success. It's a major failure. By comparison, Samsung sold 40 million smart-phones in Q1 - That is success.

  • Report this Comment On April 24, 2012, at 4:30 PM, radarthreat wrote:

    Actually, at this point in the Lumia life-cycle, it is a success.

  • Report this Comment On April 24, 2012, at 6:17 PM, melegross wrote:

    I still don't see anything that shows hope for Nokia. If hope means that Nokia will become a small phone manufacturer, then possibly. But that's not what they want to be. It would be a failure if they became the world's forth or fifth largest smartphone vendor, and the worlds third or forth largest feature phone vendor. That wouldn't be considered a success at all.

    But if success means anything other than Chapter 11, or Europe's equivalent, then I suppose it would be.

  • Report this Comment On April 24, 2012, at 6:19 PM, melegross wrote:

    nai1sirk, we have no idea as to the number of smartphones Samsung sold. They haven't given those numbers out since early last year. the 40 million is just a guess by one analyst.

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