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Another earnings report, another big disappointment for Nokia, as the launch of its new phone didn't fare terribly well among consumers. The company sold 5.6 million units of Lumia handsets in Q1, up from 4.4 million in the previous quarter and in line with expectations. Overall net sales fell 20 percent to 5.9 billion euros from a year earlier, far short of the 6.5 billion euros forecast by analysts in a Reuters poll. What's the problem? Can it be fixed?

Nokia (NYSE:NOK) was one of the first successful cell phone companies. It played an essential role in the development of the Global System for Mobile Communications. GSM was a revolutionary technology, which became the standard mobile technology that connected the masses. As a result, Nokia's stock shot up to the stratosphere, peaking in the early 2000s.

Since then BlackBerry (NASDAQ:BBRY), Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) have taken the smartphone industry by storm, virtually driving Nokia out of business. Today, Nokia is still struggling, despite its partnership with Microsoft (NASDAQ:MSFT) and the release of its Lumia line of smartphones. In fact, the company doesn't look fundamentally sound of late:

Forward P/E

Qtrly Revenue Growth (yoy)

Operating Cash Flow

Operating Profit Margins

Return on Assets

Nokia

21.32

-19.60%

-458.32M

-2.13%

-1.22%

Source: Yahoo Finance.

Why has Nokia failed to keep up with its competitors in the smartphone market and turn a profit? Let's first compare Nokia's flagship phone, the Lumia 920, to its competitors:

Nokia Lumia 920

Apple

iPhone 5

Samsung Galaxy S3

Samsung Galaxy S4

Display

4.5-inch

(1280x768)

~332ppi

4.0-inch

(1136x640)

~326ppi

4.8-inch (1280x720)

~306ppi

5.0-inch (1920x1080)

~440ppi

Weight

185g

112g

133g

130g

Thickness

10.7mm

7.6mm

8.6mm

7.9mm

Processor

Dual-core 1.5 GHz Krait

Dual-core 1.2 GHz

Quad-core 1.4 GHz Cortex-A9

Quad-core 1.6 GHz Cortex-A15 & quad-core 1.2 GHz Cortex-A7

Connectivity

4G LTE

4G LTE

4G LTE

4G LTE

Camera

8MP Rear

1.3MP Front

8MP Rear

1.2MP Front

8MP Rear

1.9MP Front

13MP Rear

2MP Front

Capacity

32GB Internal

16/32/64GB Internal

16GB Internal

16/32/64GB Internal

Price

$99 on contract

$199 on contract (16GB)

$199 on contract

N/A (April 26th expected Release)

Source: GSM Arena.

In terms of hardware, the Nokia Lumia 920 is comparable to the iPhone 5 and Samsung Galaxy S3. The Lumia slightly edges out the iPhone 5 screen for highest pixel density; however, the Samsung Galaxy S3 has the best processor with four cores.

The most glaring problem with the Lumia 920 is its weight and size. At 185 grams, it's more than 65% heavier than the iPhone 5, and 39% heavier than the Galaxy S3 -- a phone with a larger display. Not to mention the Lumia 920 is also 2mm thicker than both phones. This gives the Lumia 920 a very bulky feel, which can put off consumers who are already apprehensive about carrying a larger phone.

Samsung (OTC:SSNLF), on the other hand, was able to incorporate a 4.8" screen without adding significant bulk. Impressively, the next-generation Samsung smartphone, the Galaxy S4, will have a 5" screen but weigh less and be thinner than the S3. Nokia needs to learn a lesson from Samsung. Its next flagship phone, the Lumia 928, needs to be sleek and light if it wants to remain competitive moving forward. In terms of software, Nokia's partnership with Microsoft and its Windows Phone OS distinguishes Nokia from Apple and the various Android manufacturers. The unique user interface of the Windows 8 OS, the windows "tiles" and social networking integration, coupled with the lower price point of the Lumia smartphones gives casual smartphone users an alternative to the Apple and Android smartphones that dominate the market. This enables Nokia to carve out its own little niche in the smartphone market.

However, Nokia hasn't been able to generate nearly enough hype for its products, compared with Apple and Google. To generate more buzz, Nokia's marketing department needs to focus first on the smartphone consumer base that would benefit most from a Windows Phone -- active social networking/media users. If Nokia manages to entice a large base of Facebook (NASDAQ:FB), Twitter, and LinkedIn (NYSE:LNKD) users, it may develop the hype it needs to bring its phones back into the mainstream. But that's just a speculation at this point. That's why I will stay away from the stock.

Source: Nokia's Problem Can Be Fixed