June 7th was a day full of news for Nokia (NOK) investors, and the news weren't bad at all either.
The first news came when the company announced the launch of 3 new touch-phones under 100 euros ($125) for lower income individuals. One of these phones will be the dual core phone with 3-inch touch screen, Asha 305, and the other phones are Asha 306 and Asha 311. Currently the low end Asha phones have 10 different models and these models are distributed in more than 100 countries around the world. These phones combine smart-phone experience with long battery life and low data consumption. Prices of these phones will range between $79 and $110. This is a good move for the company.
Many people believe that Nokia should mostly focus on high end phones with high margin like Apple (AAPL) does, however there is sense in variety for this company. In the high end market, most people who can afford Apple products prefer Apple products. In the low end market, not everyone can afford Apple products. There are more than 2 billion people whose monthly gross income couldn't buy a high end smart phone. Also, in many developing countries, mobile carriers don't subsidize mobile phones and many phone models can be unaffordable for an average person. Nokia will not be totally alone in the low end market given Android's (GOOG) strong presence there; however Nokia will remain to be one of the stronger players.
In the second developing story, the VP of Best Buy's (BBY) mobile department, Scott Anderson, mentioned Lumia 900 as a "very decent seller," although he also said that Android phones were selling at an even faster rate. This is good enough for me in the short term. Nokia doesn't necessarily beat Apple or Android in the short term as the company only needs to prove that it is capable of surviving. Once the survival issues are out of the way, the company can focus on competitive issues. I believe that Nokia's sales will improve over the next couple years as more people use these phones and the positive word of mouth gets spread. There are still many people who don't know about Nokia's Lumia brand. There are many people unaware that Nokia even has a smart phone. It's good that Nokia has many happy customers at the moment, evidenced by the overwhelmingly positive reviews the company's phones are enjoying at a number of websites including but not limited to Amazon (AMZN). Furthermore, there are a lot of people who are waiting for Windows 8 phones (MSFT) to come out later this year, and these people will help Nokia's sales figures further.
International Data Corporation, also known as IDC- announced the results of a study in which the organization predicts that the Windows Phone will catch up with Apple in market share of smart phones by 2016. Currently Windows Phones enjoy a market share of 5.2% whereas iPhone's market share is 20.5%. By 2016, the phones are expected to have a market share of 19% each. Android's share is expected to fall from 61% to 52% during the same period. These results may surprise many people, however smart phone market will be much larger in 2016 than it is today. Currently very few people in the world -outside of US and Northern Europe- actually use smart phones, however, in the next 5-10 years, much of the developing world is expected to use these phones. In other words, smart phones will be the new "norm" within a decade or so as more than a billion of these units will be sold to new markets.
Finally, Nokia-Siemens Network secured another contract when it won a bid to provide Saudi mobile service provider Zain KSA with new infrastructure capable of transmitting 4G data. Nokia Siemens Networks will also provide managing and maintenance services for the company's 3G networks. This is obviously positive news for the company as it had been seeing slowing demand in Middle Eastern and North African markets.
Overall, things are looking good for Nokia. From the looks of it, the company's turnaround is working out fine, however we will have to wait until the quarterly earnings report to see how exactly the company is doing. I'm particularly interested in seeing how the company is doing in cost cutting. The revenue side seems like it will be fine.
Disclosure: I am long NOK.