Will Nokia Revolutionize Text Messaging?

| About: Nokia Corporation (NOK)

Earlier this year, Nokia (NYSE:NOK) quietly launched a new product called Nokia Pulse. The product has some interesting features such as the ability to add location to text messages, sharing more details about locations with people and being able to publish the details of the message in certain channels of social media such as Facebook and Twitter. This new product might actually revolutionize text messaging as we know it.

Background Information

Text messaging is used by nearly 4 billion people across the world. Basically, even the cheapest and simplest mobile phones carry the feature of sending and receiving text messages, which is the main reason that it is used so widely across the globe. By the early 1990s, Nokia was the first company whose phones could send and receive basic text messages at the same time. While text messaging wasn't very popular back then, many people were introduced to the concept of text messaging by using Nokia phones.

In 1997, Nokia built the first phone with a keyboard, which allowed people to type their messages more efficiently. In 1998, the company revolutionized the SMS (Short Message Service) technology. Until then, SMS technology was limited to sending out 150+ characters which would force users to pick short sentences and words to communicate. Back then, many carriers charged users for each SMS that was either sent or received, which limited the amount of text messages that could be sent by most people, particularly those on limited budgets. Nokia changed things around by introducing attachments to the text messages. Basically, the users could now attach pictures, music and other types of files to their short message. Not only could people attach multimedia to their messages, they could also purchase multimedia (such as ring tones or games) through text messaging.

From the most basic phones to the most complex ones, all phones use text messaging and a great majority of phone users across the world use their phone for text messaging on daily basis. Now Nokia intends to revolutionize this technology once again, and take it to the next level.

New Opportunities

When Nokia acquired Navteq for $8 billion in 2007, many people criticized the move because they didn't understand the opportunities this would bring to the table. As mobile phone technology improved, it took a lot of things from the GPS (Global Positioning System) technology. Today, all smart phones utilize GPS technology in one way or another. Last year, when Apple's (NASDAQ:AAPL) mapping system received embarrassing reaction from the users, many people realized the importance of adapting GPS technology successfully in order to improve one's position in the global market.

Nokia adapted its GPS technology to its smart phones in many ways. Current Nokia phones (actually all Windows Phone 8 products) come with Nokia Maps, Nokia Drive, Nokia City Lens and Nokia Transit. I personally use some of these applications on daily basis and they are very helpful.

Role of Nokia Pulse

Nokia Pulse is currently in the beta stage and it is still in the works. The application is available to all phones that utilize the Windows Phone operating system including Nokia's direct competitors Samsung, HTC and LG. So, how is Nokia Pulse different than the traditional text messaging as we know it? Here is where Nokia's innovation comes in play.

Let's say I am going to meet with a friend of mine but we can't decide on where to meet. I will send him a text message over Nokia Pulse saying "I am here." When he receives it, he will be able to see where exactly I am on the map and he will be able to get there. So, I am able to tell him where I am and how to get there by simply saying "I am here." Not only that, but if I'm at a restaurant, he will be able to even see things like customer reviews or even the menu of the restaurant as long as the information is available. Furthermore, you are able to send group messages like "hey, who wants to see this movie?" to a bunch of friends, where the information of the movie theater and the details of the movie appear.

A Game Changer?

Is this big enough to revolutionize text messaging? Well Nokia has already done that before and it can again. Nokia Pulse is just a beginning and the sky is the limit. As time goes on, Nokia will add more features and in a few years, text messaging will be completely different than how we see it today. When Nokia introduced multimedia attachments to text messages in 1998, many people probably thought it was a crazy idea and that it wouldn't really add much to the game, but it pretty much changed the entire nature of text messaging. Nokia Pulse was originally intended for Nokia phones that were operating on Symbian; however, the project was discontinued recently. It looks like the application is more suitable for Windows Phone operating system than Symbian operating system.

Whether this will be a game changer or not depends highly on the visibility of this new technology. Nokia and Microsoft (NASDAQ:MSFT) can either market this product heavily and make sure everybody knows about it, or keep quiet about it. As the competition gets tougher between the smart phone companies, each company will have to show how their phone is different from the competition and why consumers should pick their product over the product of the competitors. Nokia Pulse is definitely one of the things Nokia can use in marketing its phones and this may be one of the products that marks the revival of Nokia. If played right, Nokia could even add some advertisement to the application in the same way Google (NASDAQ:GOOG) inserts advertisement to Google Maps in order to generate extra revenue. If the product becomes popular, Nokia can even license it to other phone makers and earn money from license/royalty payments.

I am long with Nokia because the company is deeply undervalued. Normally, I have a habit of not investing in companies that are not generating positive cash flow; however, Nokia currently trades as if it will declare bankruptcy tomorrow (i.e., below its book value) and as long as the company shows the investors that it is here to stay, it can only go up.

Disclosure: I am long NOK, MSFT, AAPL. 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.