Nokia Becoming More Ambitious

| About: Nokia Corporation (NOK)

Last year, when Stephen Elop said that Nokia's goal was to reach a double-digit (at or above 10%) market share in the smartphone market, he didn't give a timeline and made it seem like the goal would be reached "eventually." Many analysts concluded that it would take Nokia until the end of this decade to reach such a market share. Now it looks like the 10% market share goal is reachable much sooner than that. In fact, last week two Nokia executives acknowledged this fact.

Nokia Upgrading Future Guidance

A couple of weeks ago, Stephen Elop was interviewed by The Guardian. In the interview, Mr. Elop acknowledged that reaching a market share of 10% was the company's "short-term" goal, even though the same number was mentioned as a "long-term" or even an "eventual" goal as recently as last quarter. When a company's long-term goals quickly become short-term goals, you know that the company is getting ambitious, which is great for the investors of the company.

Furthermore, last week, Mobile World Congress was held where another Nokia executive talked about the same thing, this time with more preciseness. To be exact, Nokia's head of Windows Phone 8 marketing Vesa Jutila predicted that the 10% market share would be reached as early as next year. While a 10% market share might be very tiny compared to Samsung's 30% and Apple's 19%, it is still a great improvement over the 4.9% which Nokia "enjoyed" in 2012. By the way, the 4.9% figure includes Symbian phones, which may not continue to exist for long.

More Phones Hit the Market

Nokia is currently attacking many markets at many levels, just like Samsung has been doing in the last several years. The company offers phones in almost every country in the world and the phones have a wide range of prices to correspond to a wide range of income levels. In the US, many of Nokia's phones were exclusive to AT&T (T), which is about to change. The company is about to release a phone for T-Mobile as well as one for Verizon (NYSE:VZ), which should help Nokia's (NYSE:NOK) market share greatly. Furthermore, Nokia's Lumia 520 is now being sold unlocked both in the US and the UK. In the US, the price of the phone will be less than $250, which makes this the most affordable Windows Phone 8 product in the country. The phone recently sold out in India, which is the second biggest market for Nokia after China.

War on Android Intensifies

In another development, a coalition of Nokia, Microsoft (NASDAQ:MSFT) and Oracle (NASDAQ:ORCL) filed a complaint with the European Commission arguing that Google (NASDAQ:GOOG) is behaving in a way that is against the rules. The coalition argues that Google is attempting to dominate the mobile phone market and control people's personal data over the Internet by pushing Android. Under certain circumstances, Google could be found guilty on antitrust charges. While Google offers Android to phone makers for free, it forces them to use its own search engine and some of its own products. The coalition of Nokia, Microsoft and Oracle further argue that: "Google is using its Android mobile operating system as a 'Trojan Horse' to deceive partners, monopolize the mobile marketplace, and control consumer data. We are asking the Commission to move quickly and decisively to protect competition and innovation in this critical market. Failure to act will only embolden Google to repeat its desktop abuses of dominance as consumers increasingly turn to a mobile platform dominated by Google's Android operating system." Keep in mind that Google is already in trouble in Europe for similar behavior and this move might increase the company's trouble.

Will Windows Phone's Future Depend On Nokia Alone?

Most companies that produce Windows Phone 8 devices fail to post a profit on these devices with the exception of Nokia. In fact, even Nokia is seeing relatively low margins on these phones despite selling 4 out of every 5 Windows Phone devices globally. In the near future we may see companies like Samsung and HTC completely drop out of the Windows Phone ecosystem because these companies make far more money on Android devices than Windows Phone devices. When and if this happens, this could leave Nokia as the only company in the Windows Phone ecosystem, which would force Microsoft to put higher stakes in the company.

Conclusion

I am positive that Nokia will beat the estimates when it announces its results for the last quarter, which is due on April 18th. I am amazed with the fact that the company's management was able to move the needle so quickly. I am also surprised that the media gave no coverage to the fact that Nokia might gain a 10% market share in the smartphone market by 2014 when in fact many analysts weren't expecting this to happen before the end of the decade (2020). For example, IDC predicted that the Windows Phone ecosystem would reach a market share of 11% by the end of 2016 and that Nokia would only account for a portion of that. Now we are looking at Nokia alone capturing a market share of 10% by 2014. If Nokia can reach a 10% market share, it will be highly profitable.

Currently Nokia's share price is around $3.50 even though the company's cash per share is $3.62. As for the company's assets, the patent portfolio alone is said to be worth between $2-3 as it generates about 29 cents per share annually on license fees and royalty payments alone. I am not putting a price target on Nokia but I can say that the company has a lot of upside potential as long as it meets most of its goals. Since Nokia upgraded its own goals recently, I am positive that it is already on its track to meet most of them.

Disclosure: I am long NOK, MSFT. 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.