What's Wrong With the Dow's Telecoms Today?

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) is down 67 points, or 0.5%, as of 2 p.m. EST. Among the heavier downdrafts, Verizon Communications (NYSE: VZ  ) is down 2.2% and AT&T (NYSE: T  ) lost 1.5%. What's going on with America's largest telecoms today?

At the heart of the matter, AT&T just released smartphone sales numbers for the holiday quarter. The announcement was heavy on cheerful spin and short on good news: Unit sales increased a paltry 6% year over year, landing just north of 10 million handsets.

Ma Bell rightly calls it a "record" quarter but never acknowledges that the days of double-digit hypergrowth are over. It looks like the low-hanging fruit has been harvested, which is bad news for margins and sales growth across the industry. The news spilled over into an industrywide rout that took all the momentum out of a recent rally:

T data by YCharts.

AT&T also noted record sales of Apple (NASDAQ: AAPL  ) iPhones and Android handsets but didn't provide hard sales numbers for either category. Apple traded sideways today, easily beating the Dow. And that doesn't make much sense in the light of AT&T's disclosure.

The most rosy-cheeked interpretation I can come up with would be that minor smartphone players Research In Motion (NASDAQ: BBRY  ) and Nokia (NYSE: NOK  ) crashed so hard that Apple and the Android army actually delivered halfway decent numbers. Even then, that doesn't help the most hard-suffering half of the handset industry. It might be time to look for the next, next big thing in mobile computing.

Nokia's been struggling in a world of Apple and Android smartphone dominance. However, the company has banked its future on its next generation of Windows smartphones. Motley Fool analyst Charly Travers has created a new premium report that digs into both the opportunities and risks facing Nokia to help investors decide whether the company is a buy or sell. To get started, simply click here now.


Read/Post Comments (4) | Recommend This Article (2)

Comments from our Foolish Readers

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  • Report this Comment On January 08, 2013, at 2:44 PM, InaFord wrote:

    It is good time to buy NOK.

    Reasons:

    Steve Ballmer said at CES, WP phones have been sold this quarter as much as 4Q11.

    Nokia sells over 70% of WP phones overall, that means Nokia has sold around 10 million WP phones in 4Q12, and analysts´ consensus is only about 6.5 million.

    Nokia has got royalty payment from RIM, and will get it continuously in the future.

    China Mobile and China Unicom have big support for Lumia 920.

    Lumia 620 is hitting many markets also this month.

    NSN has won many 4G network deals in these few months.

  • Report this Comment On January 08, 2013, at 2:47 PM, InaFord wrote:

    Nokia is a very good candidate for a big short squeeze.

    Because the stock has been over sold.

    Nokia is the most short sold stock in both Helsinki and New York!

    NOK short interest as of December 2012:

    NYSE

    281 million shares

    Helsinki

    11.38% (with investors over 0.5%, below 0.5% not listed because of EU rules).

    Nokia´s total share number (approximately 3.75 billion shares) covers both New York and Helsinki.

    That makes the sort interest in NOK around 20%!

    I also think HTC´s and Rim´s gains are almost pure predictions,

    Nokia is already recovering.

    Here is what I think:

    WP 7.5 phones such as Lumi 800 and Lumia 610 are still selling well because of the price cut, and the phones are also getting update to WP 7.8.

    Nokia is flooding the markets with these WP 7.8 phones in order to make the ecosystem grow (maybe with thin profit or no profit, but it is very important, and it is worth it).

    The encouraging things in Nokia are:

    Nokia has both low end competitive Asha phones and also high end competitive WP8 Lumia phones.

    In addition, apart from phones, Nokia has other business units like NSN, Navteq and patent portfolio.

  • Report this Comment On January 08, 2013, at 2:52 PM, InaFord wrote:

    Nokia has a brighter future than RIM

    1) BB10 is a bit late!

    2) RIM has been strong in enterprise business, but now RIM will face

    more than tough competition. For example, In China China Mobile sells the Nokia Lumia 920T for 4599 yuan with free wireless charging pad or other accessories, which means the phone costs only 4000 yuan. The phone is very much cheaper than iPhone 5 or Galaxy Note 2.

    In addition, the Lumia 920T has premium malware virus protection hardware built in.

    Therefore, will RIM´s highest end BB10 phone able to compete the price with this Lumia 920T? I really doubt that. And with a 2-year contract, China Mobile offers the Lumia 920T with only 1 yuan!

    3) RIM´s loyal fans will still support BB10 phones, but will that be enough?

    4) Beside Apple and Samsung, RIM will have to compete also with Nokia.

    Now, Nokia with WP8 is in quite a big step ahead of RIM with BB10.

    Nokia has low price point Asha phones and also high-end Lumia phones,

    so can RIM do the same?

    5) RIM will still need to use a lot of money in R&D and marketing in the future, while Nokia

    is saving money in R&D and marketing, because MS shares the expenses.

    When now, both China Mobile and China Unicom are subsidizing the Lumia 920 heavily, the 2-year or 3-year contract is starting from

    0 or 1 yuan, and considering only less than 1/5 of Chinese people are using highest-end smartphones, now even middle class Chinese people have a chance to use a highest-end smartphone because of China Mobile´s and China Unicom´s Lumia 920 deals.

    This will result into a huge number of 2-year or 3-year contract users for Nokia in China! Besides, 3G penetration in China is still very low, there is a huge opportunity there.

  • Report this Comment On January 08, 2013, at 3:21 PM, InaFord wrote:

    Steve Ballmer said WP phones have been sold 5 times in 4Q12 as much as 4Q11.

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