The fourth quarter wasn't particularly kind to Nokia (NYSE: NOK), but blue skies are right around the corner -- at least, that's what the company hopes and what at least one of its numbers suggests. Here's an overview of what the Finnish mobile-phone giant is up to, and what it all might mean for investors.

The good and bad of the fourth quarter
Let's get the depressing numbers out of the way up front:

  • Nokia's net sales were down 21% year-over-year, from $16.5 billion to $13.1 billion.
  • The company posted an operating loss of $1.25 billion, versus $1.16 billion for the same quarter last year.
  • Analysts estimate Nokia has lost as much as 7% of total global market share, leaving the company at about 24%.

Now, in the better-news department:

  • The company maintains a strong balance sheet, with net cash and other liquid assets of $7.3 billion.
  • The company has sold more than 1 million of its new Lumia line of smartphones, the handsets developed in cooperation with Microsoft (Nasdaq: MSFT).

The journey of a thousand miles ...
The new line of Lumia smartphones is the company's last, best hope to get back in the booming smartphone market. The same could be said for Microsoft. Both companies are betting on the Lumia to get them back in the fight.

Happily, the Windows Phone operating system is getting good reviews, its "tiled" interface offering a genuinely different user experience than that of either the Apple (Nasdaq: AAPL) iPhone or a Google (Nasdaq: GOOG) Android device.

Nokia has a long way to fight back against these two companies, however. A recent poll showed that, in terms of U.S. market share, Android phones and iPhones are running neck-and-neck, right around 45%. Research In Motion's (Nasdaq: RIMM) once-mighty Blackberry is hanging on by a thread, polling right about 6%.

We will fight them on the beaches and in the marketplace
In the above poll, Nokia/Microsoft phones didn't rate at all, but the company has really just begun its hard sell of the Lumias. "From this beachhead of more than 1 million Lumia devices," says Nokia CEO Stephen Elop, "you will see us push forward with the sales, marketing, and successive product introductions necessary to be successful."

And the company's strong balance sheet, along with its still strong, if dwindling, feature-phone business, offers the company the opportunity to get some traction with its new line of handsets while staying in business. There's room in the smartphone market for a third player, and Nokia has the determination, the brand strength, and the financial firepower to pull it off. And at $4.95 per share, this Fool thinks the stock is undervalued, and worth keeping an eye on.

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