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The bad news for Nokia (NYSE:NOK) right now is that its earnings are near all-time lows, and it has lost its position as the number one mobile phone manufacturer in the world. The end result is that its stock price is down by over 40% in the last 52-weeks. The good news is that Nokia's stock began to rally on July 18th, and I must admit that I have been amazed by the strength of the rally.

When Nokia's stock price sank below $2, I felt that the stock was priced as if the company was going into bankruptcy. But, I expected that the stock price was near its bottom, because with over $12 billion in cash and one of the most admired brand names in the world, I felt that the company would find a way to survive. I believed that Nokia stock would move higher if the company could report some good news.

Well, Nokia finally received some good news, and its future looks much brighter now. The biggest problem that Nokia had was that it was that after it abandoned its Symbian operating system in favor of Microsoft's Window operating system, it was unable to compete against aggressive competitors like Apple (NASDAQ:AAPL) and Samsung (OTC:SSNLF) in the vital smartphone market. But recent news has come out that makes it appear that Nokia may once again become a competitor in the smartphone market.

Nokia's Good News

On July 19th, shares of Nokia rose 8% higher after the company said it had sold four million new Lumia smartphones running Windows in the second quarter, more than analysts had expected, and double its sales in the first quarter. News that the Lumia window phones were increasing in popularity was the spark that pushed Nokia's stock price higher. At that time Nokia's CEO Stephen Elop, said the "coming release of Windows Phone 8 software in October, which promises better coordination, and more features for computers and smartphones running Microsoft software, would further lift sales of Lumia devices." Microsoft plans to aggressively promote the release of its Windows 8 operating system. That will help to enhance the release of Lumia Windows 8 phones through Verizon (NYSE:VZ), AT&T (NYSE:T), and T-Mobile.

It has recently been announced that Nokia and Microsoft have planned a big joint event for September 5th. Reliable sources believe that Nokia will announce the release of two additional Lumia devices that will be the first to feature the Windows Phone 8 operating system. The two new devices have the codenames Arrow and Phi and will be similar to the Lumia 800 and Lumia 900 smartphones. The Arrow will be a midrange device and will be distributed through AT&T and T-Mobile. The Phi will be a high end handset which will distributed by AT&T.

There is an additional rumor regarding the September 5th event. The rumor is that Nokia will announce that it has inked a deal with Verizon Communications to sell one or more of its Window 8 powered handsets through Verizon Wireless. The rumor became public in an August 22nd Bloomberg report which suggested that "Verizon Wireless has signed on to carry one or more of Nokia's yet-to-be-announced devices, and that it will offer the next Lumia in time for the holiday season." I believe the rumor because it is known that "Verizon is looking to lessen its dependence on Apple's iPhone and devices running Google (NASDAQ:GOOG) Android software."

In an unrelated bit of good news, it was announced on August 24th that Apple had won its patent infringement lawsuit against Samsung. This is good news for Nokia because it could benefit if Apple wins its injunction aimed at preventing some of Samsung's devices from being sold in the U.S. The courts are scheduled to hear the injunction in September, and if the court prohibits Samsung from selling handsets in the U.S., Nokia will face less competition when it releases its new Windows 8 smartphones. There is also the possibility that Samsung which supplies parts that are used in Apples iPhones and iPads will retaliate by not providing the supplies that Apple needs to produce its products. This would further reduce competition when Nokia's releases its new Windows 8 smartphones. The timing of these legal actions should help boost Nokia's position in the smartphone market.

Final Thoughts

I believe that Nokia's stock was undervalued and that investors were waiting for good news before they reinvested in Nokia's stock. While I always believed that the stock price would make a comeback, I was surprised by the speed of the rally. Since the good news began to filter out on July 19th, the stock price has rallied higher by 75%. After such a strong rally, it seems to me that a pullback is likely. I would avoid buying shares at this time, but would reconsider if the stock price dips. I think that Nokia will be a good long-term investment. If the release of its Windows 8 Lumia smartphones is successful, and if the rumored collaboration with Verizon comes true, that will be big for Nokia. If both events work out, I think Nokia's stock price could rise to as high as $5 per share.

Source: Nokia Could Soar To $5 On Successful Release