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Can Anything Save Nokia?

By Fool TV | More Articles
June 18, 2010 | Comments (7)

Is anyone surprised by Nokia's (NYSE: NOK  ) troubles? Following rumblings that the company was under pressure to reduce its forecast, the mobile phone maker did just that on Wednesday. In this video, Fool analyst Eric Bleeker looks at the company's continued woes.

The guidance cut has nothing to do with sales. According to researcher Gartner's estimates, Nokia still commands more than 10 times the global mobile phone market share of rival Apple (Nasdaq: AAPL  ) , and about three times the smartphone market share. However, Nokia's market capitalization is about eight times less than its American competitor. While Nokia controls volume, it's losing badly on the high end, and having to shift product mix to low-end feature phones.

Unfortunately, all of the outsized profits in today's mobile world come from high-end offerings. Smartphones all offer their own differentiated environment, and they command premium selling prices for the experience. In this valuable space, Nokia has lacked its competitors' vision to create a seamless platform beloved by developers. Thus, mobile programmers have instead rushed to Google's (Nasdaq: GOOG  ) Android and the iPhone, despite Nokia's larger user base. Also, the company never gained enterprise cachet like Research In Motion (Nasdaq: RIMM  ) , especially in the United States. While more business users globally may use Nokia phones, RIM's loyal fan base allows it to collect far high selling prices on its products.

To hear Eric's full thoughts on Nokia, and whether the thesis for buying still holds up, watch the video below:

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Fool contributor Eric Bleeker owns shares of no companies listed above. Nokia is a Motley Fool Inside Value selection. Google is a Motley Fool Rule Breakers pick. Apple is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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 June 18, 2010, at 4:53 PM, daveshouston wrote:

    Eric - I enjoyed your video and think you make some telling points.

    One of the things, perhaps the thing, that makes Walmart a great company is that they understand their role in the marketplace. They cater to low-end bargain shoppers. They locate stores were there is little price competition.

    What Walmart doesn't do is try to be something they're not. We don't see them attempting to compete with Nordstroms or Neiman Marcus.

    This is where Nokia's problem is centered. They have an upper management ego problem. They should just cede the high-end to Apple, Android, and RIM. They're going to lose out there anyway.

    The market that they own is the low end price sensitive regular cell phone business. Countries like Bangladesh, Uganda, India, and China with large populations, poor infrastructures, and low incomes are where Nokia is unbeatable.

    Their Symbian operating system is not robust enough to compete against Apple or Google. Trying to make it so with patches and add-ons is kind of like trying to convert a station wagon into a bus. It can be done but it won't be pretty.

  • Report this Comment On June 20, 2010, at 9:31 PM, TMFRhino wrote:

    Hey dave,

    Thanks for the thoughtful response. I think you're on to something here, but I don't know if Nokia would allow itself to be "re-defined" and focus on areas where its scale and expertise could allow it to be a lower-margin, high volume master. Nokia has pretty significant R&D and a feeling of mobile leadership baked into its DNA, a transition away from that would be pretty brutal on morale and involve a whole change of culture. Thoughts?

    Best,

    Eric Bleeker (TMFRhino)

  • Report this Comment On June 20, 2010, at 10:50 PM, InfoThatHelp wrote:

    Nokia is wise enough to observe smartphones becoming dumbphones purely from competition. Android is crushing Rim for instance because of Rim's clear inability to follow the leaders. Nokia has a far superior position than Rim. Whereas Rim is heading into certain demise Nokia can and should strive to capture Rim's waning market shares. Observe how Android rips Rim's customers through carrier relationships and perform the same to Rim in the non-American markets. Rim's failures on its own key home market in North America are spooking the these markets which Nokia already has superior advantages over will enable Nokia to recapture the market shares from Rim and send Rim back home to defend itself from Android, and the rising Apple supremacy.

  • Report this Comment On June 20, 2010, at 11:03 PM, InfoThatHelp wrote:

    Business Specification:

    Rim cannot afford to upgrade its global network to handle the extra bandwidth required for streaming data which is a must for video chat. SMS and email have already given way to video chatting and this is why Apple is experiencing 10 times in sales of its FaceTime video chatting iPhone 4. FaceTime is the death knell for Rim BBM. Nokia has a tremendous business opportunity in ripping Rim customers by offering video chat services that are vastly superior to BBM on Rim networks.

    Technical Specification:

  • Report this Comment On June 20, 2010, at 11:05 PM, InfoThatHelp wrote:

    Upgrade Siemens network and cell towers and offer unlimited data plans to Nokia customers.

  • Report this Comment On June 21, 2010, at 12:16 AM, rajjames wrote:

    Everything that goes up should come down. Motorola went up and came down. Now It is Nokia's time to come down. Then RIM will follow. Apple and Google will rule the mobile market for at least 5 years.

  • Report this Comment On June 21, 2010, at 12:17 AM, rajjames wrote:

    May be I suggest Nokia can plan for burial...reduce head count, close factories etc. The earlier they do it they can survive for more time.

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