Finnish cell phone expert Nokia (NYSE:NOK) is a true-blue market leader with a bright long-term future. But the short term looks very, very dark, and Thursday morning's fourth-quarter report will hurt. This stock is a Motley Fool Inside Value pick for good reason -- just look at the minuscule P/E ratio below -- but it could still fall further on myopic day-trader concerns. Then, and only then, should us long-term investors pounce. Read on for all the gory details.

What Fools say:
Here's how Nokia's CAPS rating stacks up against some of its peers and competitors:

Company

Market Cap (billions)

Trailing P/E Ratio

CAPS Rating

Apple (NASDAQ:AAPL)

$69.7

14.6

 ***

Nokia

$48.2

7.43

 ****

Research In Motion (NASDAQ:RIMM)

$28.1

16.0

 **

LM Ericsson Telephone (NASDAQ:ERIC)

$22.5

13.7

 ***

Motorola (NYSE:MOT)

$9.7

N/A

 **

Data taken from Motley Fool CAPS and CapitalIQ, a division of Standard & Poor's.

Thirteen CAPS players have rated Nokia "underperform" since the third-quarter report -- but none of these Cassandras have volunteered any explanation for their pessimism.

Meanwhile, 231 players weighed in with "outperform" calls in the same time frame, and the Pollyannas seem happy to spill the beans. In December, All-Star CAPS player SmileDarling put a cyclical spin on the stock:

Nokia has always been more about solid and practical products than flashy or stylish. And, as the old adage goes, hemlines rise and fall with the economy (good times=higher hemlines, bad times=lower hemlines) then I predict that more consumers will turn toward solid products rather than flashy products, especially if they are cheaper.

What management does:
Nokia holds about 38% of the global cell phone market, and hopes to hang on to that dominant share. That said, the entire market has hit a brick wall recently. Don't read too much into the positive gross margin trend belowl instead, you should expect more of the tumbles seen on the earnings line:

Margins

6/2007

9/2007

12/2007

3/2008

6/2008

9/2008

Gross

31.9%

32.7%

34.5%

35.1%

35.7%

36%

Operating

13.9%

14.6%

13.9%

13.7%

11.9%

11.3%

Net

13.4%

14.1%

14.1%

13.8%

10.5%

9.8%

FCF/Revenue

11.6%

12.9%

14%

11.6%

11.3%

10.1%

Y-O-Y Growth

6/2007

9/2007

12/2007

3/2008

6/2008

9/2008

Revenue

16.3%

18.3%

24.2%

29.9%

23%

14.3%

Earnings

43%

61.8%

67.3%

75.8%

(3.4%)

(21%)

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
The panic of 2008 hit Nokia hard, and it will continue to hurt for at least a few more quarters. Management says that demand for handsets is falling faster in emerging markets than elsewhere, and those areas are traditionally the company's top growth market. Slow consumer spending is making distributors and resellers hold back on orders until their inventories have cleared out a bit, so Nokia's handset sales should look abnormally low in the next quarter or three.

The mobile infrastructure segment is expected to hold up OK despite the economic turmoil, but that operation is generally not profitable. Even if it were, Nokia would have to share that bounty with partner Siemens AG (NYSE:SI). Strength in that sector, then, is probably better for profitable market leader Ericsson and up-and-comer Huawei than for Nokia Siemens.

Buying Nokia stock today looks risky, given all these caveats and mitigating factors. The Finnish lion will surely roar back to health when the world renews its appetite for quality cell phones. But Nokia's earnings reports will be scary reading in the interim, and the stock will suffer. Better to stay on the sidelines for a while, Fool.

Nokia is a Motley Fool Inside Value recommendation, and Apple is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days. Or just sign up for a free CAPS account to find the identities of the fellow Fools quoted above. They might have more to tell you!

Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is the Punxsutawney Phil of financial forecasting.