Seeking Alpha
Long/short equity, arbitrage, event-driven, research analyst
Profile| Send Message|
( followers)

I wasn't expecting this to be needed. After being positive on Nokia (NYSE:NOK), then turning around and becoming negative on it just before it took another huge plunge, and then becoming neutral to it, I am now forced to turn negative on it again.

I will explain why. Back in April 19, I had published an Instablog titled "Microsoft Might Throw Nokia Under A Bus." In this article, I said that Microsoft (NASDAQ:MSFT) could be preparing to do something really awful to Nokia, which was making the former Windows Phone 7 devices incompatible with Windows Phone 8 (Apollo). This rumor was on and off and Microsoft never addressed it properly. That is, until today. Today, Microsoft confirmed both that the present Windows Phone devices won't have any upgrade path to Windows Phone 8, and also that apps compiled for Windows Phone 8 won't run on Windows Phone 7 (though Windows Phone 8 will run all Windows Phone 7 apps).

This was like the sword of Damocles falling on Nokia's head. It cut off any chance of a recovery for the next 3-4 months. Nokia will have a desert to cross during that time, having a lineup of imploding Symbian phones now mated to a lineup of "soon to be obsolete" Lumia phones (including the recent Lumia 900). It's obvious that this will crater both segments simultaneously, as most customers won't see any point in buying devices that will be obsolete within months.

So here we are, with Nokia already having warned for the present quarter and now having a near certainty that it will warn for the next quarter as well. And this is not all - such a move will also destroy some of the goodwill so needed by Nokia to pull off its transformation. This means the effects might carry even beyond this desert crossing.

There is a feeble attempt to mask this huge problem, by means of a Windows Phone 7.8 release that will include some features of Windows Phone 8. This won't fly, because it doesn't drive away the main problem - the obsolescence implied in not being able to run Apps compiled for Windows 8.

Conclusion

With today's news it's very likely that Nokia will still trade significantly lower. Symbian will continue to implode, and now Microsoft killed any chance for the current Lumia lineup during the next 3-4 months.

In terms of timing for those still willing to buy Nokia after this, I'd wait for the next earnings warning that will inevitably result from Lumia sales being hit by this news.

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

Source: Turning Negative On Nokia ... Again