Can Nokia Soar in 2013?

Just six months ago, Nokia (NYSE: NOK  ) seemed to be locked in a head-to-head battle with BlackBerry (NASDAQ: BBRY  ) to secure the No. 3 spot in the smartphone wars. The Finnish company seems to have secured that position, largely through its partnership with Microsoft (NASDAQ: MSFT  ) . As BlackBerry keeps taking body blows, Nokia must now turn its attention to competition from other Windows Phone makers as well as the potential threat represented by the recently announced Mozilla Firefox OS. The stock remains well off its Jan. 11 high of $4.70, but the prospects for the rest of the year look solid. Given all of the positive developments for the company, Nokia should be considered a buy at current levels.

BlackBerry's woes continue
Even after all of the hype that BlackBerry was able to generate ahead of the release of the Z10 and BB10, the devices still aren't available in the U.S. Recently, the Department of Defense announced that beginning in February 2014, it will support Apple's iOS and Google's Android. Currently, of the 600,000 mobile devices in use at the Pentagon, 470,000 are BlackBerrys.

While there is no indication that the Pentagon will include Windows in the new policy, the bad news for BlackBerry is itself good for Microsoft and Nokia, as another competitor stumbles. If the two companies can convince the Pentagon to include their devices, it will give them another avenue to pursue for increased growth.

Competition is good
While much has been made of the fact that Microsoft's African strategy includes the rollout of new Windows phones in partnership with Huawei Technologies that will directly compete with the recently released Nokia Lumia 520 -- the least expensive Windows Phone to date -- this concern has been largely overblown. Despite the fact that Nokia clearly made the decision to partner exclusively with Microsoft for its smartphone OS, Microsoft never made any such deal. The concern that the success of Windows as a smartphone platform is anything but good news for Nokia is questionable.

As things currently stand, the smartphone market is disproportionately controlled by Apple and Google. While inexpensive options should help Microsoft in the emerging markets, until the OS gets a large following and the attention it needs, it will never really compete. The entrance into the Windows smartphone market by Huawei and Samsung is a sign that the platform has legs and this can carry Nokia along. It's better to own a large piece of a large market than the entirety of a small one. Competition from other companies will also push Nokia -- no slouch in hardware design -- to keep improving. This will benefit consumers and ultimately Nokia.

The Firefox threat
On Feb. 24, Mozilla announced the release of its Firefox OS to power a new line of smartphones targeted at the very low end of the market -- specifically, emerging markets. These new devices are expected to retail for about $100 and compete directly with cheap Android phones and those running Windows. To put this in perspective, the 4Afrika from Huawei is expected to retail for $150, while the Nokia Lumia 520 mentioned above will be 139 euros.

Huawei warned that it is too early to really gauge the demand for the very cheap Firefox smartphones, but the company remains optimistic. The company noted that the accompanying ecosystem and the support it receives is an important element of the new OS's acceptance. Microsoft has been working hard to develop an expanded app offering to try to compete with the two behemoths.

Where Nokia goes from here
Nokia has crafted a careful strategy that has placed it back it back on a path of growth and prosperity. The company is beginning to gather sales momentum that builds on last fall's victory in securing a relationship with the largest wireless carrier in China. Through the introduction of a series of well-received models, Nokia continues to expand its product offerings, covering everyone from premium users who opt for the Lumia 920 to a viable emerging-market choice in the Lumia 520.

The stock has long been considered a rebound play and until it can post several consecutive quarters of positive results, it will likely remain in this category. This continues to represent an opportunity that you can capitalize on. Once the largest mobile phone manufacturer in the word, Nokia knows how to manage a complex product range. Now that it has found a reasonably successful platform partner in Microsoft, it should continue to maintain its upward trajectory. As such, I believe Nokia has plenty of upside left for 2013 and belongs in your portfolio.

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 if the company is a buy or sell. To get started, simply click here now.


Read/Post Comments (7) | Recommend This Article (4)

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 February 28, 2013, at 5:33 PM, raulia wrote:

    Blackberry is emerging towards NUMBER ONE position.Samsung and Apple start falling into recession due to expensive showrooms they had open in the absence of Blackberry all over the world and no product to beat Blackebrry.BB Z10 is iphone Samsung,and Android killer.woaaaaaaaaaaaaaaa!!!!!!!!!!!!!!BBRY $250 soon.........

  • Report this Comment On February 28, 2013, at 7:04 PM, jwyoungy wrote:

    I actually think there is room for Nokia and blackberry. Everyone talks like it will be Android at 75%, Apple at 20% and then one other company can claim the last 5%. Here is a news flash, apple and android can give up enough market share so that several other OS can be successful, at least the 2 with a good start and here is why. Apple is loosing its cool image and people are getting tired of the same old thing. The evidence of this is that recent polls have shown teens don't think apple cool and that in the UK and Canada up to 40% of people buying the z10 are coming from Apple and Android. As for Android, people get upset waiting for software updates (sometimes they never come) and some features don't work well or at all on some phones. Who will be number 3? I don't think that's the main question. I think the main question is who looses the most now that Windows and BlackBerry have devices that can truly compete with iOS and Android.

  • Report this Comment On March 01, 2013, at 8:33 AM, crowbait51 wrote:

    Have I missed something? Is there any sign that Nokia/Microsoft has any positive momentum in any market anywhere in the world? Not that I am aware of.

  • Report this Comment On March 01, 2013, at 11:07 AM, sammycooool wrote:

    Nokia will never take the #3 spot with WP8. Never going to happen. Show us some proof that Nokia is in the #3 spot. I hate reading miss-information on this site. BlackBerry is heading for a tie with #1 in 2014. BB 10 is the best OS in the world by far and already we are seeing AAPL fold under the pressure.

  • Report this Comment On March 02, 2013, at 6:45 PM, ctyank99 wrote:

    Nokia IS going to soar...it's just a matter of when and how long it will take for the stock price to follow. NOK will be classic turn-around story!

  • Report this Comment On March 02, 2013, at 6:48 PM, ctyank99 wrote:

    "Blackberry is emerging towards NUMBER ONE position"... are you nuts? They'll be lucky to stay in business! The co-sounder of Blackberry (RIMM) just sold his remaining stock! Here comes Nokia!

  • Report this Comment On March 02, 2013, at 6:48 PM, ctyank99 wrote:

    Nokia is making all the right moves.

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