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.

Sadly for my worthy opponent, this duel is unfair. Beaten-down Nokia is really a heavyweight poised to outclass its competition. In the meantime, a low stock price provides an excellent opportunity to pick up an outstanding company at a bargain.

Rather than why buy Nokia, let's start with why Nokia (NYSE:NOK) is a buy. The company has a dominant market share in the fast-growing market for mobile phones. Cash on the balance sheet stands at $14 billion, debt at $800 million. Profit margins run around 12%, return on equity, a heady 24%. The stock sells for about 16 times estimated 2004 earnings and just 14 times 2005 earnings. That is cheap.

Tell me why
The bad news, reported by Chris Mallon back in April, was a decline in first-quarter worldwide market share from 38% to 35.7% (which, come to think of it, still is pretty dominant). Making matters worse, the price of an average cell phone fell 10%.

That all sounds bad. But, we are debating the future of Nokia's business and its stock price. Look carefully and you will see that the stars are aligning for a full recovery.

Shareholders and critics will recall that it was in mid-priced flip phones that Nokia lacked product, and where competitors Motorola (NYSE:MOT), Sony (NYSE:SNE), and Ericsson (NASDAQ:ERICY) grabbed share. Look for Nokia to plug that gap and refresh its product offerings (and still keep its long-term 40% market share target) by launching 40 products in 2004.

To that end, the company has already launched nine new phones -- including its first fashion-category flip phone and its first mega-pixel camera phone. It has already got a running start at reversing its market share slide.

In this corner...
The innovator. Last year, Nokia moved ahead of NEC (NASDAQ:NIPNY) to take the lead in camera phone shipments -- the fastest-growing market segment. The company also dominated the low-price segment. Not long ago, the concern was that Asian manufacturers would work that market away from Nokia. Work they did, but dominance was Nokia's counterpunch.

On June 1, Nokia announced it had surpassed palmOne (NASDAQ:PLMO) as the world's top seller of mobile computers. Indeed, Nokia smartphones are preferred to handheld computers by many, and its share of the market stood at 28% in the first quarter -- and we're talking about a market more than 40% larger than it was the year before!

On the high end, Nokia is the first to introduce and ship a camera phone with a "complete imaging experience." Consumers can capture, print, edit, store, and send images and videos. You get an Internet browser, full e-mail, and thousands of downloadable utility and software packages. Need a map? How about golf training before that noon tee time? You need this smartphone!

There is no doubt that Nokia needs to vastly strengthen its mid-price presence with a number of flip-phone designs. But, given the challenges the company overcame in the low-price market, isn't it reasonable to assume that it is up to this challenge, too?

In that corner...
A close look at the competition confirms that Nokia is up for a fight. True, 40% of all mobile calls are made through Ericsson systems, and, yes, Ericsson has a net cash position of $4.5 billion. But sales declined last year and the company reported an operating loss. What's more, Ericcson sells for 19 times projected 2005 earnings -- a bit rich for a company coming off such a rocky performance.

Motorola, despite a healthy net cash of $1 billion, looks downright anemic when compared to Nokia on the basis of operating performance. Return on equity is just 11% and profit margins are slim at 4.5%. Then again, slim must be in (an Atkins effect maybe?) -- the stock sells at 22 times 2005 earnings. That's more than a bit rich.

Finally, while Sony may have a great name and reputation, its balance sheet isn't so great. It carries a net debt of $1.2 billion. And the business? How about profit margins of 1.2% (talk about puny), and a 3.9% return on equity? At 18 times projected 2005 earnings, Sony hardly looks like a bargain when compared to Nokia.

And the winner is...
Getting a sense of what Nokia has going for it? It dominates its market. Its reputation is tarnished, perhaps, but high margins allow it to earn more than its competitors on each dollar (or euro, or yen) of sales. The stock sells for a discount to its peers -- which pale on most, if not all, balance sheet metrics. If these stocks justify their current prices then, based on earnings and prospects, there is plenty of room for Nokia's multiple to expand.

Finally, add in 40 new products, and the company's history of building market share, and the upside could be substantial. Not convinced? Nokia also pays a Motley Fool Income Investor-esque 2.6% dividend -- something none of the competitors comes close to matching.

Clearly, what's unnerving Wall Street is that the second quarter will be like the first -- with flat to slightly declining revenue. Investors who want a quick fix have discounted Nokia shares. All the better for us. Don't worry about Nokia. It has the skills necessary to keep the competition on the ropes and reward the faithful in its corner.

Next: Read Seth Jayson's Nokia No Way and then vote.

Fool contributor W.D. Crotty does not own stock in any companies mentioned. The Motley Fool is investors writing for investors.