Nokia's Asha 501 Proves The Company Still Is A Formidable Competitor

| About: Nokia Corporation (NOK)

Much has been written recently that paints Nokia (NYSE:NOK) in a very negative light. The latest has to do with shareholders who are very upset with CEO Stephen Elop for betting the company's fortunes on Microsoft's (NASDAQ:MSFT) Windows Phone platform, as opposed to Google's (NASDAQ:GOOG) Android platform. The arguments basically suggest that, in teaming with Microsoft, not only did Nokia put itself in a bad spot when trying to compete against both Apple's (NASDAQ:AAPL) iOS and the Android platform but, even worse, Nokia may have backed itself into a corner in the sense that its own partner Microsoft might "do them dirty," either by developing a Windows Phone of their own, making changes to the operating system harmful to Nokia, or the like.

Ironically, these events took place on Tuesday, May 7. A mere two days later, on May 9, CEO Elop, together with other Nokia executives, a representative Nokia developer and a representative from Facebook (NASDAQ:FB), took the stage in New Delhi, India and announced the release of Nokia's new Asha 501 product.

If you wish to invest the time to review this fully, here are two links. The first is to a video of the live webcast. This will consume approximately 54 minutes of your time, perhaps a little less if you skip around. If you wish something a little shorter, this four-minute conversation with Nokia's Jussi Nevanlinna offers a nice summary and overview. Or, you can simply read on for my high-level summary.

Overview of the Asha 501

Right off the bat, let's get the price point out of the way. Nokia has priced the Asha 501 at $99, before taxes and subsidies.

Similar to phones in Nokia's Lumia line, perhaps the first thing readily noticeable about the Asha 501 is its vibrant colors - bright red, bright green, cyan, yellow, white and black. On the face, the glass extends from corner to corner, very similar to the look of an iPhone 4 or 5. The phone features two-piece construction - the back is easily removable with a single snap. The build quality appears to be exceptionally solid for a phone at this price point. One feature that struck me is that it comes in a Dual-SIM version which will allow users to swap SIM cards without even having to power off the device.

As far as the technical specs, here are just a few high points:

  • A 3.0" QVGA TFT Capacitive Screen (240 x 320 pixels)
  • 4 GB of internal memory, expandable to 32 GB with an added micro-SD card
  • A 3.2 MP camera
  • WiFi
  • Battery life that Nokia claims to be 17 hours of talk time and an amazing 48 days of standby power

Unlike the Lumia line, the Asha does not use the Windows Phone operating system. Instead, it uses an operating system utilizing technology from Smarterphone, a company Nokia acquired in 2012. The user interface features very heavy use of "swipe" motion gestures.

By swiping left or right, there are two basic "looks" available to the user. One is an icon-filled screen, very similar in appearance to both iOS and Android. The other is something Nokia calls Fastlane. It appears to borrow at least to some extent from the look and feel of the Windows Phone interface. Basically it is a timeline. Appearing most directly on the screen are your most recent activities (the present). If you swipe upwards, you see previous activities (the past). If you pull down, you see things like upcoming appointments (the future). All told, it is a very simple, intuitive interface.

There are two additional features that show Nokia's understanding of the market for which it is developing this phone (it was no accident that the phone was premiered in New Delhi, India), and the needs of that demographic. These are:

  1. Data compression built into the integrated browser. As Jussi Nevanlinna explains in the video linked above, this feature allows for data to be compressed up to 90% before being routed to the phone. In a part of the world where people do not typically purchase unlimited data plans, and have limited budgets, this feature is very beneficial.
  2. Even further, Nokia and Facebook have partnered with several local operators to essentially offer Facebook free, with no data plan required. This allows users a way to become exposed to the online experience, even if their funds are extremely limited.

Additionally, in an associated press release, Nokia says the following:

The HERE experience, based on Nokia's leading location-based platform, will also be available as a download for the Nokia Asha 501, starting in Q3 2013 and will initially include basic mapping services.

In summary, both from the standpoint of the phone itself, but also because of the "usage" aspects I feature above, the Asha 501 is a very innovative and exciting product.

That's All Well and Good, But Can't You Also Buy an Android Phone For the Same Price?

This is a common objection that I have seen when proposing that Nokia is a solid investment. Even though Samsung has become far and away the dominant player in the Android space, several manufacturers now offer relatively cheap smartphones based on this OS.

To be fair, I had never specifically looked at the question of how offerings in the Asha line stacked up against such Android-based competition. I asked myself the question; "What could you get in the Android world for $100, unlocked?" Fortunately, with a little searching, I found a helpful reference.

On the site, reviewer Taylor Wimberly has been presenting monthly updates to an article he writes entitled "Best unlocked Android phone for any budget." He starts at the high end, the $500 - $600 level, and works down from there. In his April, 2013 edition of that article, he suggests the Huawei Ideos as the best choice at an unlocked price target of $100. Take a minute to look at the specs for this phone, and then we'll continue.

Right off the bat, you might have noted the Ideos was announced in September 2010. So, it's been around a while. You may also have noticed that many key specs were quite similar. For example, the Ideos' screen, at 2.8", is slightly smaller than the Asha's, although the pixel count is the same. It features 512MB of ROM onboard, much less than the Asha's 4 GB, although you can put a 32 GB in each as an add-on. It has a 3.15 MP camera, roughly the same as the Asha's 3.2 MP. Battery life is quite a bit less than the Asha's, at only 4 hours talk time and about 8 days (200 hours) of standby. To be fair, it does appear that the Huawei can connect to 3G networks, whereas the Asha is limited to 2G networks. However, this appears to be a conscious choice on Nokia's part, as the intended initial target market typically only uses 2G networks, and could be modified as needed.

In summary, the Asha 501 certainly appears very competitive, from both a hardware and functionality standpoint, as compared to this top-rated Android-based phone. Lastly, Nevanlinna features Nokia's legendary build quality as a selling point of the Asha 501 and I believe that he is correct in this, that Nokia already has a great reputation in these markets.

Summary and Conclusion

Nokia has recently announced multiple new products, several at the high end of the market. These include the recently-released Lumia 928, developed specifically for Verizon, and the Lumia 925, featured at the May 14th event in London. From a technological and "wow" standpoint, perhaps these products far overshadow the Asha 501. Why did I take the time to feature this product?

Simply put, because to me it clearly shows Nokia's recognition that there is a very large world outside of those fortunate enough to be able to afford any of the latest "killer" products that they so choose. The person, for example, that upgrades to the iPhone 5 for no other reason, and with no other goal, than to be the envy of their friends.

No, this business of communication is very beneficial to a much bigger world than that. What struck me most about the Asha 501 as I watched and read through a ton of information in preparation for this article - in fact, that really inspired this article - was the sense that "I could be happy owning one of these." I am so happy to think of all the individuals who may actually have that opportunity at a very reasonable price.

In a previous article, I suggested a "loyalty program" to upgrade existing Nokia "legacy phone" users to something a little more contemporary. Even for extremely budget-conscious consumers, products such as the Asha 501 would seem to be viable candidates for such a program.

Lastly, let me leave you with one intriguing question. Nokia has previously stated that it has a backup plan in place in the event its Windows Phone partnership with Microsoft falls through. After seeing the operating system on the Asha 501, and because it is clear that Nokia is already working on building a developer base for it, I can't help but wonder if this, or some variant thereof, comprises part of its backup plan?

In conclusion, when taken together, all of it makes me excited about continuing to be long Nokia's stock.

Disclosure: I am long NOK, 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.

Additional disclosure: I am not a registered investment advisor or broker/dealer. Readers are advised that the material contained herein should be used solely for informational purposes. Investing involves risk, including the loss of principal. Readers are solely responsible for their own investment decisions.