Pending Microsoft Alliance Boosting Nokia's Performance

| About: Nokia Corporation (NOK)

Earlier this summer, Microsoft (NASDAQ:MSFT) went shopping.

This shopping expedition was designed to help improve Microsoft's perceived deficiency of being weak on mobile products, so it was on the lookout for a telecommunications company that had an established global reach and existing agreements with phone carriers.

It found Nokia (NYSE:NOK), a Finnish manufacturer which at one time had the largest share of the smartphone market, but slowly lost ground to Samsung (OTC:SSNLF), Motorola (NYSE:MSI) and others. And $7.2 billion later, or at least when all the paperwork is complete, Microsoft will own Nokia's handset division.

Is the decision good for Microsoft? Undoubtedly, since it gains a larger competitive advantage and the company doesn't have to get back into hardware development, which it didn't do so well.

What about for Nokia? The answer is a little more uncertain

Nokia's stock is already reacting positively to the pending Microsoft acquisition. Last week, share prices went past $6, hit its 52-week high of $6.74, and settled in the low $6 range by the end of the week.

By this week, prices had risen to $6.5, and if this rate continues, it could hit $7 within days.

In the short term, Nokia stock can be an excellent choice to purchase, not just because of the Microsoft collaboration but Nokia's own innovative products.

It's true that the high-tech arena is notorious for rapid changes in value, and now that it formally has allied with Microsoft, Nokia may become a bigger target for Google (NASDAQ:GOOG) and Apple (NASDAQ:AAPL), especially when hardware starts emerging.

Some tech fans are getting impatient for the Nokia Lumia 520. GDPInsider said it was originally supposed to be released at the end of September, but now may be delayed until the Microsoft deal is fully formalized.

The device, informally called a "Phablet" because it's like a phone with tablet features, is now expected to hit the street later this fall, possibly November, as WP Central predicts.

This delay of the hybrid device actually might work in the company's favor, rather than pitting it directly against the release of the next iPhone in September. A Black Friday/Christmas season launch also could be beneficial.

The Lumia is expected to have 32 GB of storage, run Windows Phone, a 20 megapixel camera, and a 1080 p. 5- to 6-inch screen. It will also be powered by a more powerful battery.

Tech watchers haven't reported a confirmed price, but are encouraged by a recent announcement that another Lumia smartphone will be cheaper.

The Street reports that the Lumia 1020 will now retail for $199 when purchased with a 2-year AT&T contract, a nice drop from $299 for the same term. AT&T will also throw in a handy camera grip, great for times when you aren't sure which end to hold when it's time to say cheese, worth $79.

If this kind of savings is available for the Lumia 520, Nokia will have a hit on its hands. The price hasn't been confirmed.

Even though a lot of Nokia's short-term future is considered "pending" based on the Microsoft acquisition, some storm clouds may start showing up on the horizon, at least for investors.

Long-term, even Microsoft can be seen as not the most ideal partner. Though the company remains stable, it still is lacking a CEO, and is facing a dwindling amount of desktop purchasers as more customers switch to mobile.

Hardware-wise, the company has made some well-publicized missteps when it tried to bring forth a music system to complete with the iPod (Zune), and the iPad (Surface).

Just because the Microsoft-Nokia collaboration will eventually create some potentially new personal technology, the marketplace will decide if they're ready for it in a big way, or if it will land in the same "also ran" category as past underwhelming products.

Other bright spots for the company include:

Patents: While it sold the handset arm to Microsoft, Nokia has hung onto its patent portfolio. Rather than using them for its own innovation, reports that it will begin licensing the technology to other companies. This is good for other development efforts and can help strengthen Nokia's bottom line.

New leadership: Forbes tells us that if the Microsoft deal fully concludes, Nokia CEO Stephen Elop will receive more than $25.5 million to step aside, with Microsoft paying 70% of the severance package.

But though a lot of Nokia's future is still "pending," it's may not be completely smooth sailing, and Nokia is taking some risks. Though Microsoft has achieved global dominance with its PC software, that desktop market is dwindling. More often when not, when it entered the hardware market, it never has made much of an impression.

WallStCheatSheet questions why Nokia is considering using Windows RT in future tablets, rather than Android OS or iOS, currently the two dominant operating systems.

However, the same article complimented Nokia's efforts to begin focusing on the hybrid/phablet market rather than throwing more products into the fairly established smartphone and tablet market that may create dull sales.

Finally, Apple CEO Tim Cook even uses Nokia as a lesson of how fast tech fortunes can change, Five years ago, Nokia was at the top of the smartphone pile, and now it's ranked 10th and ready to be absorbed by Microsoft.

Definitely uncertain times are ahead!

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

About this article:

Author payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500. Become a contributor »
Tagged: , , , Communication Equipment, Finland
Problem with this article? Please tell us. Disagree with this article? .