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I feel a little bit foolish because in my article published on August 5th of this year, "A Tale Of 2 Beaten Down Stocks: 1 To Buy, 1 To Avoid", I recommended that investors sell Nokia (NOK). At the time, the company was trading at around $2.50 per share, having recently experienced a violent rebound from the 52-week low of $1.63. However, the recent unveiling of the Lumia 920 phone coupled with a deeper look at the phone landscape as a whole has led me to believe that the phone maker could rebound even perhaps in the medium term.

Why Windows Phone 8?

Windows Phone 8 is actually a big deal. Why? It's a slick, fast, and easy-to-use phone operating system backed and supported by one of the strongest operating system design teams in the industry. Now, this isn't to say that Google's (GOOG) Android and Apple's (AAPL) iOS aren't also great, but common sense would say that Microsoft (MSFT) is bound to gain traction with its new and improved version of its Windows Phone OS. But common sense isn't enough, so here are some more fun facts:

  • Microsoft Dominated The Console Market: Remember when Sony (SNE) was the "untouchable" player in the game console market? Well, Microsoft's first Xbox was pretty successful; it outsold the Nintendo GameCube, but lagged significantly behind Sony's Playstation 2. But the firm's second attempt with the Xbox 360 was a slam-dunk success, frequently outselling the Playstation 3 and the Nintendo Wii month after month. Microsoft didn't get it quite right at first, but eventually it succeeded brilliantly.
  • Strong Development Ecosystem: If there's one thing that Microsoft does well, it's, well, software. The new Windows Phone 8 OS simplifies porting of Windows 8 apps to Windows Phone 8, makes porting over from other platforms such as Android, Symbian, and iOS much easier than with Windows Phone 7, widening the app base for Windows Phone 8.

Why Nokia?

Nokia is very well positioned in the Windows Phone ecosystem and during July captured 59% of the Windows Phone market. People seem to really like Nokia's offerings! The current generation Lumia 900 received great reviews and is priced very competitively, with this reviewer concluding,

"In all, it's a fantastic piece of technology. It just looks and feels like nothing else on the market. It hits all the right notes for me. A little bit retro, a little bit futuristic, with a touch of quirky humanity in its otherwise very machined design. This is the Nokia I grew up with, and it's clear the company hasn't lost its ability to enchant through hardware"

More importantly to Nokia and its shareholders, Nokia's latest Windows Phone 8 offering, the Lumia 920, comes packed with a great screen, best-in-class camera, a very fast Qualcomm (QCOM) Snapdragon S4 CPU, 4G LTE support (the Lumia 900 had this, too), and an aesthetically pleasing design. Reviewers were generally impressed with the phone with Techworld concluding,

"The Lumia 920 looks good and performs smoothly. It has a deluge of features, and a great camera. And the Windows Phone 8 software really stands out. Camera features like the ability to add motion or delete people who've wandered into the shotalong with the phone's augmented reality-flavoured City Lens will likely set the Lumia apart from other Windows Phone handsets"

The main takeaway here is that Nokia has bet its future on its Windows Phone 8 lineup and so far it seems that the company is doing its job well: great hardware and great software. With a great product in hand, Nokia's main job will now be to make sure that the general public is aware that these phones are here and that they rock. The firm's brand, while probably a lot less "popular" than it was in its heyday, still resonates with customers. The ball is in the marketing department's court at this point.

Conclusion

Nokia's back, but time will tell if the company's Windows Phone push will restore the firm and its stock price to glory. The risks here are obvious: there are lots of good phones out there with compelling hardware and software features in the Android, iOS, and even Windows Phone camp (Samsung, anybody?). Plenty of excellent phones with wonderful hardware, great software, and sexy price tags go unnoticed in the crowded world of smartphones. Establishing grabbing customer mind-share with an excellent brand and reputation will be key, and that remains the major risk to Nokia's future. But hey, it's nice to know that the actual phones won't be the major headwind to Nokia's success.

Source: Nokia: A Windows Phone 8 Fueled Comeback Isn't Crazy