Nokia's Lumia: Good Technology But A Marketing Fiasco

Sep.13.12 | About: Nokia Corporation (NOK)

There were quite a few product releases during last week - none was more anticipated than Nokia (NYSE:NOK)'s Lumia launch. Investors were hoping that the Lumia could bring about a turnaround in the sales and margins of the troubled Finnish manufacturer. Recent moves by the company's management, such as putting its business unit on the market and abandoning Symbian to focus on the Windows Platform, shows that even the management thinks the Lumia is its turnaround bid. Therefore, nothing can justify the lack of "preparation" for this incredibly important launch. There should have been an announcement for product release dates and network partners for investors. AT&T (NYSE:T) initially partnered with NOK for the Lumia 900 launch and marketing. We believe this bad launch was more a marketing failure, and although minor, was still is a setback to Nokia's turnaround bid.

Technical Review

The reviews on the Lumia 920 and 820 have been generally positive. The flagship phone for the launch was the Lumia 920, which comes with a 4.5 (1280x768) inch display. The outer body has been slightly changed as compared to the Lumia 900 - this one has a slight glassy look as compared to the matt finish of previous Lumia phones. The screen gives you an experience that is slightly better than HD, with its Pure Motion HD display. It gives an experience that is not available on any other Nokia device. The real sell point, according to Nokia, is the PureView camera. The results for PureView are much better than other similar cameras on the grounds of reduced blurredness and better pictures at night. This is certainly a big plus point from a users perspective, as most phone camera pictures are low quality due to lighting issues and blurredness. Wireless charging is also another feature that helps the Lumia 920 stand out in a crowded market. The Qi Wireless charging technology enables charging the phone through magnetic induction. There are a few other features that make the Nokia Lumia an interesting phone, but one that is worth mentioning is CityLens. To use this feature, you have to hold up your Phone and it will automatically tag each store, street and location in the picture, according to its name and address. Tech experts still do not have open access to the device - therefore, stakeholders will have to wait for an in-depth review.

Wrong Marketing

To begin with, the presentation was all wrong. Instead of generating excitement with a crisp affair, which should have focused on basic design features and marketing strategy for the new phones, the presentation went on about technical details, which investors weren't interested in as yet. The biggest concern for investors was the lack of information provided on the phone's network partners. This was the most crucial piece of information that investors were looking for, as it would have shown the faith that networks were putting into the Lumia. Another major error was not announcing a date for the phone launch. We believe these two were the primary reasons behind the stock's slump following the launch.

Stock Slump

Click to enlarge

Source: Y-Charts

As can be seen in the graph given above, the stock tanked more than 15% after the Lumia launch. This was an exaggerated reaction to a piece of missing (network partners and launch date) information, which would have surfaced sooner or later. We have already discussed in detail how Nokia is undervalued at this stage, and its patents alone are worth $2.3 per share. The stock is now trading at approximately its pre-launch prices.

Conclusion

We believe that Nokia was over-cautious with the launch, which resulted in a lack of information for investors, who reacted adversely. We have a buy rating for Nokia, and believe the company has a good chance to turn around. We believe anything below $2.3 per share would be a very good entry point for investors.

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

Business relationship disclosure: The article has been written by Qineqt's Technology Analyst. Qineqt is not receiving compensation for it (other than from Seeking Alpha). Qineqt has no business relationship with any company whose stock is mentioned in this article.