Bears Say Nokia's Products Are Obsolete; Consumers Disagree

| About: Nokia Corporation (NOK)

Whenever I hear a Nokia (NYSE:NOK) bear say "Nokia's products are way behind the current trend, Nokia needs much better products to compete with likes of Apple (NASDAQ:AAPL) and Samsung," I always ask them "So. when was the last time you actually held a Nokia device?". Then I find out that they haven't seen a Nokia product in years and many of them still think Nokia's phones are similar to phones it produced nearly 20 years ago. You know, they are talking about those phones that came with a game where a snake was growing as he was capturing dots in the screen.

Recently, Nielsen (NYSE:NLSN) went ahead and surveyed a bunch of Nokia Lumia users to see how satisfied they were with their phones. The results surprised many people, but they didn't surprise me at all. It turns out that Nokia's consumer satisfaction is much higher than most companies. To be more specific, 96% of the respondents said that they were satisfied with their Lumia. I don't remember the last time a product got overwhelmingly high rate of acceptance by the users. When was the last time a nearly-bankrupt company came up with a product that received 96% approval from consumers?

On Amazon (NASDAQ:AMZN) black Nokia Lumia 900 has more than 400 ratings. Out of the 425 ratings, 356 are 5 stars, 25 are 4 stars and only 22 are 1 star. The average star rating is 4.6 out of 5.0 for the product. Earlier, Nokia bears suggested that these reviews were entered by individuals that are paid by marketing department of Nokia. Nielsen's survey invalidates that argument, unless Nokia's marketing also paid respondents of Nielsen's survey to give positive feedback, which is extremely unlikely.

In addition, 95% of the respondents said that they would recommend Lumia to their friends, 83% reported that the device either met or exceeded their expectations and 85% said that if they could go back, they would have bought the same phone again. In addition, 91% of Lumia 900 users believe that their phone is better than the competition's similar phones. These are solid numbers and they are not the type of numbers you would expect from products of a company that stock market thinks will go bankrupt soon. The market continues to think that Nokia's technology is far behind competition and it has no chance of survival, evidenced by the fact that Nokia's current market value is below the value of its patent portfolio. The stock market sees Nokia as dead already; however consumers refuse to agree with the stock market's assessment.

The survey was conducted shortly before Microsoft's (NASDAQ:MSFT) announcement that Lumia 900 users would not get an upgrade for Windows 8, and this might have dropped the phone's approval ratings a little but, however the ratings are as solid as it gets. In Amazon, Lumia 900's ratings didn't move down at all after Microsoft's announcement, which shows that consumers aren't that worried about the upgrade.

I believe that word of mouth is the best source of marketing. If every Lumia user could convince one of their friends to get the phone, the number of Lumia users would double in no time. As long as current users of a product are happy, word of mouth will positively influence the sales for that product. Another note, the survey was conducted in the US with AT&T users. Given that the company's brand image is not as strong in US as in other countries, the results impress me even more.

There are a few lessons to take from this survey:

  1. Nokia is far from dead.
  2. Nokia enjoys a rate of customer loyalty not many companies enjoy.
  3. Nokia's products are not obsolete as many would suggest.

Don't get me wrong, Nokia has a very tough road ahead. Things won't be easy at all, however the company has shown us over and over that it is capable of achieving many great things. When was the last time a company on the brink of bankruptcy came up with a product that received 96% approval from customers?

Disclosure: I am long NOK, AAPL, MSFT.

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