If W.D. Crotty says the sky is blue, Seth Jayson may beg to differ. In this duel, Seth takes issue with W.D.'s claim that Nokia is a poor, misunderstood value. Instead, he thinks that Nokia is seriously out of touch with the current market, and the fix is not forthcoming. Read both articles and then vote for which argument you think is better.

You know that episode of Gilligan'sIsland, the one where Gilligan gets hit on the head with a coconut and undergoes a drastic personality change? ("No such episode," you say? Quiet, you. I'm trying to make a point.).

Well, a similar thing happened to me a couple of mornings ago. ("You got hit by a coconut?" Shhh! Really, I'm building to something here.)

I underwent a complete transformation, an intellectual 180. I wasn't conked on the noggin, though you might wish it by now. The catalyst for my metamorphosis was the knowledge that my Foolish nemesis, W.D. Crotty (Boo! Hiss!), thinks that ailing Nokia (NYSE:NOK) is a misunderstood value. And as any good superhero or villain knows, when your archfoe takes a stand, you have to respond with the opposite.

Sure, I may in the past have penned a couple of articles suggesting patience for the Finnish juggernaut. Yes, I might have pointed to the firm's reliable earnings and cash flow, but all that can change if sales don't come in at the top of the page. And that's exactly the problem these days: Nokia's sales are slacking for a reason. So, ignore what I wrote then. Look past the numbers, past the smiles and optimism, and instead take a walk with me down a short path and take a peek at the reasons you should stay away from Nokia.

Losing big
If you've read anything at all about Nokia over the past few months, you've read this. Earlier this year, the stock was pummeled after management revealed that sales and earnings were not going to measure up to previous guidance. Worst of all was the loss of market share. Back then, it looked like Nokia's 38% had slipped to 35%. But later reports paint a much more ominous picture. Turns out, rivals like Motorola (NYSE:MOT), Ericsson (NASDAQ:ERICY), and Samsung had gobbled up a big portion of what should have been Nokia's lunch, perhaps cutting the latter's slice of the cell-phone pie down to 29%.

The stock has remained in the gutter. Just take a look at this chart. It's still treading water just above a 52-week low.

Clams, not candy bars
To judge by much of the market chatter, the matter is as simple as a clamshell. The clamshell format is cell-phonespeak for flipping phones that pop open like the old Star Trek communicators. Nokia didn't have them -- everyone else did. Instead, Nokia has been sticking with its tried-and-true "candy bar" or "soap bar" format. Unfortunately, over the past few months, people seem to have preferred Star Trek to Snickers, and I can't blame them. In addition to comprising an unwieldy lump, the candy bar, with its exposed keypad is -- despite plausible protests from proponents -- prone to the accidental and dreaded random pounding of keys by unintended body parts.

We might be able to forgive this oversight if Nokia looked like it was scrambling to fix the situation. Instead, I invite you to take a look at the website. How many clamshells do you see there?

Garroted by gadgetry?
Bill Mann suggested a while back that Nokia might be one of several companies losing its way in our gadget-infested world. TV-top boxes? Handheld video games? What for, Nokia? Can't you just dance with the girl you brought?

The more I look at Nokia's latest product offerings, the more I see an asylum that's being run by the inmates, er. I mean, the engineers.

Consider its latest technological leap: the glowstick. Yes, the Nokia 3220 contains a bank of LEDs that flashes and allows an (easily entertained) user to write a 15-character message in the air by waving the thing back and forth in the dark. "Exchanging messages across a crowded room or at open-air concerts will never be the same," exclaim the marketing wonks. I would love to see the transcripts of the focus group that came up with this needless doodad. Sounds like they have been spending too much time studying TV teens rather than the real things.

Unfortunately, expensive fliers like this are common in Nokia's product lineup. A closer peek at its current offerings reveals a truly bewildering array. It looks like the creative minds at Nokia's design labs are suffering from a serious lack of oversight. Sure, it's their job to figure out how to squeeze nifty new features into phones, but someone needs to give a serious pull on the reins and figure out a way to give consumers what they actually want.

Quality kills quantity?
This is a touchy subject, but I'm going to cover it anyway and acknowledge that my evidence is completely anecdotal. Following my last couple of Nokia articles, I got at least half a dozen messages from disappointed, former Nokia owners who told me, quite plainly, that they didn't like the quality of the latest offerings from Finland. Let me be clear. These weren't Nokia bashers. They had been happy with Nokia in the past, but just didn't consider the latest phones to be as good. Was it mere coincidence that no one bothered to send me an email espousing the virtues of his Nokia phone? Possibly.

But a couple of recent CNET (NASDAQ:CNET) reviews of the N-Gage and top-of-the-line 6230 and girly-purse-looking 7200 don't have much love for Nokia's screens, software, or sound. When a gadget costs as much as these do (from $350-$700), everything ought to be perfect. After all, there are plenty of other phones on the shelves.

Competition calling
This may be the final nail in Nokia's pine box. OK, maybe that's a little overdramatic. Let's say that the changing cell-phone scene may present the final reason that you shouldn't touch this stock with a 100-foot cell tower.

As Alyce Lomax seems to delight in pointing out, Nokia's nemeses, like Motorola, are eating up market share. But they are only the most visible threats. Oddly enough, the rapidly expanding international market may also prove to be a hospitable habitat for smaller companies, little rodents that can scurry among the elephants, outmaneuvering their giant rivals, picking up seeds, and growing fat in the process.

Gone are the days when only a global powerhouse with deep cash reserves could bring a product to market. Cell-phone guts are largely available on the open market, even stuff for the high-end gadgets. Just take a look at the minute, graphics-processing components available from ATI (NASDAQ:ATYT) and NVIDIA (NASDAQ:NVDA), and camera modules from Fuji Photo Film (NASDAQ:FUJIY). The Finnish-born open-source operating system Linux is also making its way into phones.

The best example of one of these new movers is Ningbo Bird, a Chinese firm that came out of nowhere to duel Motorola for the top share in the Chinese cell-phone market. It has recently joined forces with Siemens (NYSE:SI). In this light, Nokia's recent moves to shift more R&D dollars into China look like an attempt to wedge its foot back into the door of what could turn out to be the world's biggest cell-phone market. But while Nokia might be able to harvest Chinese technological prowess, it may fall short in fashionability. As analysts have pointed out, Ningbo's success has been tied to its ability to tap into Chinese tastes, whether that's for heart-shaped phones or culturally friendly user interfaces.

Given the vast differences in tastes between cultures, it may be too much to expect a global company to compete with a local producer. Now that cell-phone technology has become a commodity, like a fancy jacket or a handbag, how long will it be before we see a Ningbo-type startup in South America, India, or the Middle East?

The final word
The none-too-subtle hand-to-hand reference to Michelangelo's Sistine Creation of Adam on Nokia's phone screens make it plain that the company still considers itself a major innovator. But novelty doesn't always beget success. Nokia doesn't need more ideas. It needs fewer ideas. It needs better ideas. In short, it needs focus. And until it shows evidence of meeting that need, investors ought to be very wary indeed.

Interested in more on Nokia?

  • The Fool's Nokia board has more information than you can comfortably digest.
  • Alyce Lomax tells part of the tale here and here.
  • Pre-coconut prognostications by Seth Jayson are here.

Next: Read W.D. Crotty's Nokia's Ready to Deliver and then vote.

Fool contributor Seth Jayson reserves the right to flip-flop whenever he wants. When he is not trying to smack W.D. Crotty with a folding chair, he sometimes answers email. He owns no stock in any companies mentioned. View his Fool profile here. The Motley Fool has a disclosure policy.