The nearly 40% run-up in Nokia’s (NYSE: NOK) stock price in the past month must be bittersweet for longtime Nokia shareholders. The stock could only have performed so admirably because of the precipitous decline that shareholders were forced to endure this year -- sort of your Catch-22 situation. Much of the blame falls on the underwhelming results from the first Lumia phone release.

But why the dramatic stock price appreciation in the first place? If my eyes don’t deceive me, that’s the new Windows 8 Lumia smartphone I see, ready to be unveiled on Sept. 5 at the Nokia World Event.  But if the rumors are true, will it matter?

The rumor mill
Rumors are scary, particularly when they drive stock prices, as they have with Nokia the past month. The jump in share price can’t be attributed to Nokia’s Q2 earnings report. The slight bump in net sales vs. Q1 2012, the return to operating profitability (before one-time items) of Siemens Networks, and positive net cash from operations were nice. But they hardly warrant a 40% appreciation in company value.

Nokia’s strong, $11.9 billion cash on the balance sheet, and ridiculously high 9.8% dividend, aren’t the catalysts for that kind of appreciation, either. Nokia’s been sitting on that pile of cash, and paying solid dividend yields to shareholders, even as the share price has steadily declined from its 52-week high of $7.38 over the past year.  

No, this run-up is tied to CEO Stephen Elop’s statements from July’s earnings announcement relating to the Lumia smartphone rollout, running Microsoft’s (Nasdaq: MSFT) Windows 8 OS. Mr. Elop had this to say early in his quarterly summation: "We believe the Windows Phone 8 launch will be an important catalyst for Lumia." Funny he should mention that, and reiterate the sentiment as recently as Aug. 14 that he is "…confident to unveil a new smartphone with Windows 8 soon…." With the Nokia World Event around the corner, it’s easy to see how this rumor got started.

Adding to the controlled excitement is the (projected) timing of Apple’s (Nasdaq: AAPL) iPhone 5 rollout.  If those rumors are true, the grand unveiling of the Lumia/Windows 8 phone will pre-date Apple’s much-anticipated smartphone upgrade. We should learn more about the iPhone itself, and the release dates, at Apple’s rumored Sept. 12 event in Cupertino, a week after Nokia’s shindig.

Will it matter?
The ultimate question that Nokia shareholders are asking themselves is the most vital: Is Lumia, with the Windows 8 OS, the answer? There are still mountains Nokia must climb, regardless of rumors.

Standard & Poor’s downgrade of Nokia’s long-term debt rating to BB- from BB+ isn’t debilitating, particularly with Nokia’s balance sheet, but it doesn’t help. Nokia’s reaction? A stifled yawn. Company CFO Timo Ihamuotila reiterated the growing cash reserve and positive cash flow in Q2 in an Aug. 15 press release, specifically addressing S&P’s move.

Microsoft may very well enter the already-crowded smartphone market itself, according to CEO Steve Ballmer. Of course, that may end up being nothing more than the usual Ballmer banter that's designed to raise the ire of Apple management. But as Microsoft’s soon-to-be-released Surface Tablet (running Windows 8) indicates, it’s not averse to entering the marketplace with new devices.

Follow the light
To Nokia’s credit, they haven’t completely given up on lower-end smartphone users and emerging markets. The increase in mobile phone sales, to 73 million units in Q2, was attributed to strong sales of Nokia phones running the pre-Windows,  Symbian OS. Take South Africa, for example: Of the 10 million smartphone units sold, Nokia’s lower-end units commanded a 40% market share. Interestingly, Research in Motion’s Blackberry led the way, with 48% of the market.

As for Lumia, the 4 million units  sold in Q2 2012 was a big improvement over the first quarter’s 2 million. That’s not nearly enough to make Nokia a significant smartphone player, but it's certainly a step in the right direction.

It’s not a stretch to suggest that Nokia’s future -- at least as it’s foreseen by CEO Stephen Elop and team -- is riding on the new Lumia with Windows 8. But there is light ahead for Nokia believers. The shoring up of Siemens Networks, the sale of licensing assets, and more than enough cash to hold on until the new Lumia takes root, should give true believers hope. Assuming the rumors are true, that is.

As seems  par for the course with companies in the smartphone space, there is no shortage of rumors, most notably when it comes to the king of the smartphone market, Apple. Beyond the iPhone 5 release, there’s always something new coming out of Cupertino. Our comprehensive Premium Report details the risks and opportunities Apple presents, so grab your copy today.