Shares of Nokia (NYSE: NOK ) have been on a run ever since bottoming out over the summer. The company now trades an incredible 134% higher than it did at the lows set in July. Investors have enjoyed much of that gain in the last three weeks, as reports surfaced in mid-November that the company's newest Lumia 920 flagship was seeing booming demand in geographies like Germany.
The device promptly sold out in the country, leaving Nokia scrambling to restock the phone, and giving investors hope that Lumia sales would shine this quarter. Are they about to be disappointed?
Pacific Crest analyst James Faucette seems to think so. While product sellouts can be indicative of soaring demand, they can also point to supply shortages. Faucette believes we're seeing the latter as opposed to the former. His channel checks point to a few thousand units at initial launches and that retailers are only receiving "very small" shipments of Lumia 920 units. There is pent-up demand that leads to those units moving rather quickly, but there might not be a lot to go around in the first place.
That same storyline could be playing out domestically, where AT&T (NYSE: T ) has scored device exclusivity with the Lumia 920. Ma Bell may only be selling 10,000 to 15,000 units per week, judging by current inventory levels. Faucette's estimates peg supply of new Microsoft (NASDAQ: MSFT ) Windows Phone 8 devices at approximately 1 million units this quarter, with only half of those selling through to end users.
Here's the good news: the net result is that Nokia may be able to post higher Lumia sales this quarter than a year ago, thanks in part to older Lumia models still on sale. The company sold about 1 million Lumia devices in the fourth quarter of 2011 when the product family launched. Since then, Lumia sales have continued to ramp up, but the rest of its smartphone lineup has been ramping down, and Lumia sales were 46% of smartphone units last quarter.
Still, if investors get ahead of themselves hoping for a Lumia blowout, they could end up sorely disappointed.
Even within the Windows Phone 8 platform, Nokia faces increasing competition. There were reports recently that Samsung's Ativ S that also runs the operating system would be delayed until next year, but Samsung said the device remains on track for launch this year. The device is now beginning to launch internationally, but there are no signs of it stateside.
HTC will be the one giving Nokia a run for its money in the U.S. with its Windows Phone 8X. Unlike Nokia, HTC escaped exclusivity and the 8X is available on three out of the four largest domestic carriers: AT&T, Verizon (NYSE: VZ ) , and T-Mobile. That gives HTC's Windows Phone flagship wider distribution than Nokia's flagship, although Nokia has a lower-end Lumia 822 available on Big Red's network. Add in the fact that some early reviews consider the 8X the best Windows Phone 8 device available, and it's clear that Nokia has its work cut out for it.
Nokia recently announced a version of the Lumia 920 bound for China Mobile (NYSE: CHL ) , the world's largest carrier. The Lumia 920T will retail for roughly $740 without contract, as China Mobile focuses more heavily on the prepaid and unsubsidized segment of the market. It's also launching the 920 on China Unicom (NYSE: CHU ) . Again, HTC is also putting the heat on; the Taiwanese OEM just launched its devices on all three of China's biggest networks, going head-to-head with Nokia.
The Lumia lineup very much represents the future of Nokia's smartphone business. Overall smartphone shipments have been on the decline as the company transitions to Lumia sales, which has hurt consolidated results. But Lumia has done well for its first year with 9.9 million units.
Sources: Earnings releases and conference calls.
It's a good start, but it's still going to take a while for this turnaround to take shape.
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