Nokia: Will The Fortune Shine Again?

| About: Nokia Corporation (NOK)

After seeing various downs and downs, Nokia Corporation (NYSE:NOK) still seems to be in the race to capture the third place in the smartphone clan. The stock has rebounded by around 40% in the last six months, giving some relief to its investors. The company is still trying hard to regain its position as a behemoth of the smartphone industry. And so far, the future seems a little secure after the company launched its Lumia range of phones based on Microsoft Corporation's (NASDAQ:MSFT) Windows. Nokia reported sales of around 4.4 million of Lumia handsets in the fourth quarter of 2012, even though it didn't have worldwide distribution of the product. Its high-end smartphones have created enough buzz in the market, and therefore, the company is now targeting the lower-end market to expand its reach to a wider set of customers.

More smartphones - more opportunities!

At recently held Mobile World Congress in Barcelona, Nokia launched two new Lumia phones, i.e., Lumia 720 and Lumia 520. These models will offer the Windows 8 platform at the lower price points. Via these launches, the company is trying to widen its Lumia range targeting at customers who don't want to spend on high priced smartphones. These phones will directly give competition to the cheaper Android phone makers such as Huawei Technologies and ZTE (OTCPK:ZTCOF). Nokia is aiming to capture a higher market share in the emerging markets, as these phones will bring in more volumes to Nokia with the growing appeal of Windows operated phones in such markets. China Mobile Limited (NYSE:CHL) has already committed to sell these two new models of Nokia starting in the second quarter of 2013. In late 2012, Nokia entered into a partnership with China Mobile to grab its market share in China against the giant-Apple's iPhone. Nokia has already achieved the milestone of sales of two million Lumia devices in China. And, to further continue on this trajectory, this partnership with China Mobile came as a right move.

Along with this, the company also has an opportunity to launch its Asha range of handsets in the Chinese markets. These phones have some high-end features at an affordable price, which can be a big hit among the price sensitive Chinese consumers. Side by side, Nokia will get the benefit of its brand image of durability as compared to its Chinese competitors.

I anticipate Nokia will launch around 10-12 devices under the Windows 8 platform in 2013. This in turn can lead the Nokia Windows Phone to capture a market share of approximately 7% of the overall smartphone market. At this moment, the company is focusing more on its volumes rather than the profitability. Therefore, the ASP (average selling price) would mostly remain stable in 2013. However, the improved production and shipments will certainly improve the cash flow conditions between Microsoft and Nokia.

More smartphones - more competition!

As Nokia is entering the lower-end smartphone market, it is set to see some new competitors. Last month, Microsoft joined hands with Huawei to sell Windows-based smartphones in Africa. This smartphone will hit the lower-end market in Africa, which is among the fastest growing markets. With this partnership, Microsoft is trying to build-on more relationships like Nokia, which is paying off well to the company.

Another threat to Nokia in the lower-end segment would be the already announced line of smartphones by Mozilla under the Firefox operating system. These devices will be targeting the emerging markets with an attractive pricing of about $100. With more and more players targeting the low-end smartphones market, these might act as a headwind for Nokia in capturing higher market share.

The investing idea

Currently, Nokia definitely is not in a position to rule the smartphone industry. However, the company has an interesting strategy, which seems promising and can keep the stock's momentum going. The company is efficiently trying to expand its portfolio from the premium users to the lower-end in the emerging markets. Nokia has already got a good reputation in the emerging markets, which provides it a huge opportunity to improve its overall market share. Not to forget, as long as the company continues with its successful partnership with Microsoft, it is set to see more upward trajectory. I feel the stock is all set to bounce back with more upside potential in 2013. I recommend a buy on this stock.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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