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Nokia Lifts the Hood; Mr. Softy Flees

Last Friday, Nokia (NYSE: NOK  ) saw something rare: market-thumping gains!

Once again, takeover talk was the culprit behind the optimism, not Nokia's actual business by any means. Specifically, the rumor was that South Korean conglomerate Samsung was interested in scooping up the Finnish smartphone maker in an expression of self-loathing and masochism.

The idea makes absolutely no sense. I'm pretty sure Sammy is doing just fine on its own, leveraging Google (Nasdaq: GOOG  ) Android to leapfrog Nokia over the past year to become the No. 1 smartphone vendor in the world, according to IDC's first-quarter figures. Samsung's market share nearly tripled while Nokia's was sliced to nearly a third over the same time, although part of Nokia's loss has also been Apple's (Nasdaq: AAPL  ) gain.


Q1 2012 Smartphone Market Share

Q1 2011 Smartphone Market Share

Samsung 29.1% 11.3%
Apple 24.2% 18.3%
Nokia 8.2% 23.8%

Source: IDC (May 2012).

The iPhone has not been kind to Nokia -- just look what's happened to the gadget maker ever since the original iPhone's launch in 2007.

NOK Chart

NOK data by YCharts

Ouch. Samsung went ahead and shot down the rumor, telling Reuters, "Such reports are purely speculative and are not true," sending shares back whence they came.

Never one to take "no" for an answer, the market quickly clamored onto the next buyout rumor to satisfy its speculative cravings. This time, our old friend Microkia stopped by for a brief visit just to catch up. It was December the last time it showed its ugly face, and this visit was a tad behind schedule compared with my expectation that we'd say hello again in three months. Better late than never, I suppose.

This time, The Register is saying that Microsoft (Nasdaq: MSFT  ) was given a peek at the inner workings of Nokia's books to consider a possible deal, and the software giant politely fled the scene after seeing Nokia's private parts. If you ask me, this relationship is a little lacking in the intimacy department.

Consider this gloomy chart directly from Nokia investor relations.

Source: Nokia investor relations.

If you think that looks bad, just imagine how it looks from the inside. Sales fell 9% in 2011, gross profit shrank by 12%, and adjusted operating profit plunged 43%. Operating cash flow dropped by 76%, and adjusted earnings per share was cut in half.

Sorry, Nokia. You're destined to go it alone.

Apple's continued decimation of rivals like Nokia is one reason you should buy Apple. The Mac maker still has plenty of upside thanks to ample opportunities in the next phase of the mobile revolution: tablets. Apple will still face some risks, though, so grab this premium research report from our senior technology analyst to read up on what may stand in Cupertino's way.

Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Microsoft, Apple, and Google. Motley Fool newsletter services have recommended buying shares of Google, Microsoft, and Apple and creating bull call spread positions in Apple and Microsoft. 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 (2) | Recommend This Article (2)

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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 June 12, 2012, at 9:35 AM, radarthreat wrote:

    Yes, dear Fools, we recommend you buy we can also sell you our 'premium' AAPL research report!

  • Report this Comment On June 12, 2012, at 7:08 PM, g777k wrote:

    This is an excellent exercise in market satire. Bravo.

    Unfortunately, it holds no real/new clues or help to the investor, only adding to the long list of "APPL is kicking everyone's rear" arguments - all well documented, disseminated and factored into fearful investor's minds.

    Another author recently called MSFT+NOK "two technology has-beens", a remarkable dramatization of reality. This is just a rehash of the same pointless points, according to which these companies have made a ton of $B by being stupid and now is the time for them to get in line for the soup kitchen.

    Aside from the diagram above - showing NOK has racked up quite a few billions in 4.5 of the last 5 years - the author vastly miscalculates the often-asleep-at-the-wheel MSFT giant who is propping NOK up. MSFT is now wide awake after a few slaps on the face, and is finally dead-serious about mobile.

    AAPL will be inertia-driven for a while, but gravity will slowly take over. Samsung has been stealing AAPL's lunch too, just follow the intensity and acrimony of lawsuits between the two.

    So I bet NOK stock revisits $5 a lot sooner than now rudder-less AAPL hits $1,000. Exact same % upside for investors, your choice. Place your bets.

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