Last phone standing

This 2-page Reuters article describes the declining cell phone market and presents a case for Finnish giant Nokia emerging from the stumbling economy less battered than its rivals.  I tend to agree.  The Finns are known for their methodical, conservative approach to business and I believe that trait is the main element enabling Nokia to weather the economic storm.

As on-target as I generally found the article to be, though, the author did neglect to mention that a large part of Nokia’s resilience has been and will be due to its success in emerging markets.  Instead, he makes this comment:

In a shrinking market, handset makers are battling for the only remaining growth business — smartphones — where they face newer rivals such as Apple (AAPL.O), with its iPhone, Blackberry maker RIM (RIM.TO)(RIMM.O) and Google (GOOG.O).

That’s only true in certain regions.  There are still plenty of opportunities at the mid-to-low end in China, India, et al.  That was worthy of mention but oddly missed.

Regardless, this is an amazing result for a company that only relatively recently got into mobile communications at all.

Just for fun, here are the current values (in US dollars) of my communications-oriented investments, as I write:

Alcatel Lucent ALU 2.11 -0.05
Alvarion ALVR 3.53 0.15
Ciena CIEN 7.71 -0.06
3Com COMS 2.39 0.04
JDS Uniphase JDSU 4.42 0.16
Motorola MOT 4.50 0.00
Nokia NOK 14.60 -0.15
Sprint S 2.41 -0.04
Turkcell TKC 12.81 0.52
Verizon VZ 31.19 -0.60

I don’t want to even talk about some of them, like MOT.  But I see NOK at this price as being a buy.  It’s always been good to me before in this zone…

Disclosure: author is a former Nokia employee


5 responses to “Last phone standing

  1. allnameswereout

    Mmm, not a stock holder anymore?

    2008Q4 statistics

    More sales, less profit. Nokia argues is because of economy, but they lost market share while LG did fine.

    I’m sure you can find an English summary… 🙂

  2. Yes, I’m still a stockholder… but accumulating carefully. Nokia at $14 (USD) is good, but great at $12. I hold for the long-term (and more than doubled my money last time I sold).

    The margin development is no surprise, and has been explained by the company on numerous occasions. Sell low-cost phones to developing nations in large numbers, build a large loyal base, and take a margins hit while those regions grow economically. Then hopefully the same customer base will come back to you for more advanced (expensive) phones. It’s a conservative, long-term approach typical of Nokia.

    The problem is, Nokia’s experience in the US is highly indicative of what can be expected in the future of, say, India and China. If Nokia cannot retain (much less grow) smartphone owners in the US, then how could it do so elsewhere? Even numbers for Europe are declining.

    This is one reason why OPK has continued to stress the importance of the US market, but his words seem out of sync with the results. So I’m not sure what’s going on…

  3. allnameswereout

    One thing I find striking is that all of Nokia’s competitors have embraced touchscreen mobile devices, including in high-end segment while Nokia hasn’t (discounting the Maemo tablets). While competitors have been able to dive into this market, Nokia is far slower jumping into the water.

  4. For several years Nokia has been slow in almost every aspect of cell phone innovation. The tablets are an exception, but as you (allnameswereout) indicate even the tablets are starting to suffer from that seeming indifference.

    The fact is that Nokia’s conservative business approach works for it to a large extent and against it in specific areas. They are counting on the bigger picture successes to outweigh the losses in novelty. Nokia waits for a market to prove itself before diving in with their own version… personally I think all of this is calculated to address future maturation of developing regions. Time will tell.

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