Nokia (NYSE:NOK) is expected to report its Q1 2011, earnings on April 21st. The key question on our minds as we await the results – can Nokia tackle its short-term issues, while at the same time sufficiently addressing long-term growth plans? From the short-term perspective, Nokia continues to face stiff competition from Apple (NASDAQ:AAPL), Research in Motion (NASDAQ:RIMM), Motorola Mobility (NYSE:MMI) and Samsung in both the high-end and the low-end of the mobile phone market. Regarding the long-term outlook, we’ll be interested in hearing more specific details regarding Nokia’s partnership with Microsoft (NASDAQ:MSFT).
We currently maintain an $11.78 price estimate for Nokia stock, roughly 30% above market price.
Short-Term Issues Persist
Nokia continues to face heightened short-term competitive pressure from big names like Apple, Research in Motion, and Motorola Mobility. In the last 2 years, Nokia has lost significant market share in mobile phones – in emerging markets alone, its share has declined from about 45% in 2008, to 33% in 2010. 
Nokia recently announced a strategic partnership with Microsoft, in which it will adopt Windows Phone 7 as the main operating system for its smartphones. However, the transition to implement the new partnership could take at least two years to complete, after which Nokia hopes to see growth in both market share and margins. Two years is a long time to wait for improvement, so it will be interesting to see if Nokia has been able to gain ground in the most recent quarter.
Need to Formulate Long-Term Strategy
Clearly, the partnership with Microsoft is part of a long-term growth strategy. Nokia is hoping that this partnership will not only counter market share declines, but also help cut operating costs.
Through this partnership, Nokia can save on both R&D and SG&A costs that it currently spends on development of its Symbian operating system. Moreover, Microsoft could help Nokia gain presence in the U.S. market (where it has a smaller presence) through its marketing prowess.
This is only the first earnings call since the announcement of the partnership, so we eagerly await the first real glimpse into management’s particular plans and optimistic outlook for the deal.
- Data taken from Nokia’s annual SEC filings
Disclosure: No positions