Some investors seem to be clamoring at the huge profit potentials of a rumored Windows RT 8.1 tablet and phablet series by Nokia (NYSE:NOK) that may or may not be launching in late September. I'm a long-term investor of Nokia and hope to see the company thrive in its quest to support Microsoft's (NASDAQ:MSFT) Windows mobile platform as a way to differentiate itself from the likes of Samsung, HTC and Motorola. I'm just not sure a tablet is the answer - not yet at least.
Bullish investors will throw terms like "Qualcomm" and "Snapdragon" or specifications such as "32GB" and "2.15GHz" and "quad-core" and they'll cheer while telling us to buy, buy and buy some more. Do not drink the kool-aid! Do not succumb to the hopes that Nokia has discovered the recipe that will sell Windows tablets.
As much as I would love this venture to be successful, I'm weary as a shareholder.
Microsoft failed at launching a Window-based tablet
Microsoft botched introducing its own tablet that resulted in a 900 million dollar hit last quarter due to the sad crash of poor Surface sales. Microsoft couldn't sell a Windows tablet so why would we possibly think Nokia could? Because they worked out an arrangement with AT&T (NYSE:T)? Or drafted out a nice price point strategy? Or maybe the hardware will simply be beautiful and astounding? None of these questions addresses the fact that people, especially consumers in the U.S, have not yet embraced Windows 8 in a market dominated by iOS and Android.
Many other tablets have failed
The Motorola Zoom is clearly the poster child of failed tablets. A high price tag combined with an old version of Android at launch resulted in a total dud. Motorola was betting that people would flock to an alternative to Apple's iPad and they were wrong (at the time). Microsoft recently made the same mistake.
Android-based tablets like Samsung's Galaxy Tab and Note series have gained traction. But does anyone remember the Dell Streak, HP TouchPad, Blackberry Playbook or the Toshiba Tablet? All of them were dismal failures and cash burners for the representative company.
The rumored specs
Microsoft-News.com blogged a 10.1-inch, 1080p display Nokia tablet running Windows RT would be ARM-based (Qualcomm Snapdragon 800 processor) with 32 GB of built-in storage, include a detachable keyboard/stand and be manufactured by Compal to be revealed by Nokia in late September and launch with AT&T LTE support.
The Chinese site Digiwo posted pictures of what it claimed to be Nokia's coming 10.1-inch Windows RT tablet, as noted by The Verge. The picture shows a red tablet with both Nokia and Verizon logos. The Verge also claim its sources believe the Nokia Windows RT tablet would run the Qualcomm Snapdragon 800.
Based on Friday's closing price, shares of NOK are trading 1.49% above the 20-day simple moving average, 4.74% above their 50-day simple moving average, and 11.67% above their 200-day simple moving average. These numbers indicate a short-term, mid-term, and long-term uptrend for the stock, which generally translates into a long-term buying mode for traders.
Shares of NOK, which currently possess a market cap of $15.26 billion, a forward P/E ratio of 33.98, and a gross margin of 31.00%, settled Friday's trading session at a price of $4.14/share. Nokia has roughly $12.64 billion in cash and an estimated $6.97 billion of debt on its books.
Impressive technical specs and nice looking hardware are not enough to sell tablets. Consumers have not yet been wooed by Windows 8 to move from Android or iOS. As much as I would benefit from a successful line of Nokia tablets and phablets hitting the market, I am very skeptical that this is a good time for Nokia to make such a risky move.
Disclosure: I am long NOK. 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.