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Nokia Hit Hard With Shift to Smartphones in Q3

The recently released Q3 mobile phone sales results from Gartner Research held few, if any, surprises. The big boys did what most expected, growing market share in the increasingly important smartphone market as consumers continue to shift from old-school feature phones.

For Finland's Nokia (NYSE: NOK  ) , a slip in overall market share was overshadowed by its significant drop in smartphone sales, from No. 3 to No. 7, worldwide. But before Nokia shareholders pack it in and run for the hills, let's take a closer look at the timing of its new Lumia rollout.

Some specifics
With a total of 82.3 million units sold in Q3, Nokia ended the period head and shoulders above Apple's (NASDAQ: AAPL  ) 23.55 million, but lagged industry leader Samsung by 15.65 million. The difference, of course, is Apple sales consist of smartphones, and Gartner's research confirmed that even while mobile phone sales declined compared to the year-ago period, smartphones continue to pick up steam heading into the biggest quarter of the year.

Now, more than 82 million units is nothing to sneeze at, and it surpassed analyst estimates, in large part because of the success of Nokia's Asha line of touchscreen phones. While Apple, Research In Motion's (NASDAQ: BBRY  ) BlackBerry 10, and overall sales leader Samsung continue targeting the higher-end smartphone user, Nokia's Asha was, and continues to be, aimed at the mid-range user. Even as upgraded Asha units hit the shelves, Nokia's kept the focus on the $99 smartphone crowd.

Smartphones dominate
Smartphone sales continued to grow worldwide, and grow impressively. The 3% drop overall in mobile units was overshadowed by a nearly 47% jump in smartphones sold during Q3, compared to 2011. The demand in the Chinese market -- an area of strong interest for Apple (among others) this coming quarter -- along with existing smartphone users finally beginning to trade up, will continue.

The sales increase of iPhones, Samsung's Galaxy, and RIM's jump to No. 3 (based on operating systems) reinforce the importance timing played in Nokia's new Lumia running Microsoft's (NASDAQ: MSFT  ) Windows 8 OS. Why? Because much of Nokia's decline in smartphone sales -- from third to seventh overall with just over 7 million units -- was expected. Much like RIM and its soon-to-be-released BlackBerry 10 alternatives, Nokia's Lumia smartphone needs time to gain some traction.

Gartner, among others, recognize Nokia needs to get at least a couple quarters under its belt before the slide in market share abates. Not factored into the Nokia smartphone equation just yet however, are a few more worthy competitors -- Microsoft and Google (NASDAQ: GOOGL  ) .

Google made it clear with the purchase of Motorola Mobility is was just a matter of time before it expanded beyond its industry-leading Android OS and dove head-first into smartphone manufacturing. Like all smartphones, you'll find lovers and haters, but the Nexus 4 is a legit competitor that Nokia and other phone manufacturers can't ignore.

As for Microsoft, Nokia's smartphone partner, what the release of its Surface tablet told me was a smartphone is coming, regardless of CEO Steve Ballmer's refusal to discuss anything remotely connected to Microsoft's plans for the future. But make no mistake, a Microsoft phone is coming, and will be another obstacle to Nokia reversing its fortunes.

Why Nokia's worth your consideration
As the Gartner research indicates, a bet on Nokia is, to a large extent, a bet on Lumia and Windows 8. Smartphones are the future, and the future is now. In spite of the recent numbers, there are a couple of reasons Nokia warrants your consideration:

  • Nokia's 9.1% dividend yield is pretty darn attractive. The concern cited by some is with Nokia's cash pile dwindling each quarter, that nice dividend yield is in jeopardy -- and that's legit. But as I'd mentioned in a recent article, even with the decline in ready cash, Nokia's balance sheet remains strong.
  • Nokia is at least two quarters away from learning if Lumia is a success or not. Heading into Q4 and the holiday season will be telling for sure, but it's simply too early to know if Lumia has legs. If Lumia takes off, and you're a Nokia shareholder, you can expect a great 2013 while enjoying one of the best dividends around while you wait.

Unlike Nokia, Apple is king of the smartphone castle, and Q3 reinforced its dominance in this exploding market. But the debate rages as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and more importantly, your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

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 November 20, 2012, at 2:44 AM, llIlllIlllIlllIl wrote:

    That's extremely annoying.

  • Report this Comment On November 20, 2012, at 11:02 AM, radarthreat wrote:

    Jeez CaEv, just write your own article, would ya?

  • Report this Comment On November 20, 2012, at 12:33 PM, emuziek wrote:

    @ --CaEv -

    PLEASE stop posting the same info on all the blog sites please. I swear I've read your posts on every blog related to NOK in the past few months - You're using several alias / user names and just copy+paste the same old stuff. -- Enough already! It doesn't change anyone's mind about the stock. The posts are annoying chatter on the net....

    Long NOK. Long RIMM Long MSFT

  • Report this Comment On November 21, 2012, at 5:51 AM, clbjblk wrote:

    Westport does not make a natural gas phone yet but it is a game buster I guess if you play Gardner options with that news letter drama pick. and now the cell phone theory is truly a great pick I guess they will put there cell towers where ever they find the fracking spot.Nok checks will never bounce as high as a fools newsletter at least they only hold your money for a while and ATM is waiting for Dave to make his German pick. Listen to CaEv long NOK MSFT and if you want to talk about fuel now HFC is set to run all there shut down work is done or ahead of schedule which means more fuel with out worrying about Obama fracking rules ,WPRT is pricing themselves out of your rule breakers not your fault but you should have built in the time, Govt. factor,not the state but the FED, SO BRING THAT PROMO BACK IN A YEAR.

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