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Karl Pratt
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I am an individual investor, and have never been employed in the securities business in any way. My professional background is in the finance/tax area, with some IT experience along the way as well. I currently work for a software provider.
  • Nokia's Impressive Cellphone Lineup Bodes Well For Future 0 comments
    Mar 18, 2013 9:32 AM | about stocks: AAPL, GOOG, MSFT, SSNLF, T, NOK

    Nokia (NOK), once the world's preeminent cellphone manufacturer, now finds themselves in the fight of their lives.

    Background and Challenges

    On the upper end of the spectrum, Apple (AAPL) has established dominance. Beginning with the iPhone 3G, Apple literally revolutionized the smartphone. Today, Apple's flagship phone is the iPhone 5.

    Via their Android operating system, Google (GOOG) has also developed a commanding presence in the marketplace. In fact, while Apple is still the #1 smartphone manufacturer in the U.S. (37.8% OEM market share), Android is now the #1 platform (52.3% platform market share). (Source: comScore January 2013 report)

    As Nokia struggles to regain market share, it finds itself waging war on multiple fronts. In the high end of the market, it finds itself in competition with both Apple's iPhone5 as well as high-end Android phones, perhaps most notably Samsung's (OTC:SSNLF) Galaxy S3 (and likely the just-released S4). At the same time, Android phones offer competition at the lower end of the market.

    Nokia has responded by aligning themselves closely with Microsoft (MSFT). Abandoning their home-grown Symbian operating system, CEO Stephen Elop partnered with Microsoft, declaring that Nokia would develop exclusively using the Windows Phone operating system.

    In November, 2012, Nokia released a new flagship phone, the Lumia 920. In the U.S., the phone is an AT&T (T) exclusive. This phone boasts several impressive features, including:

    • A 4.5% screen with 1280 x 768 resolution. At 332 ppi pixel density, this screen offers better density than even the iPhone 5's 326 ppi. Further, it is touch-sensitive even if the user is wearing gloves.
    • An 8.7 MP camera with Carl Zeiss optics and image stabilization
    • Wireless charging
    • 4G LTE connectivity

    However, doubts as to Nokia's continued success still abound. These are reflected in everything from assertions that the 920 is too big and heavy to doubts that Nokia can compete against low-cost Android devices. The latest concern I have read is that Microsoft themselves may come out with a competing smartphone.

    Nokia Expands the Lineup

    At the 2013 Mobile World Congress (MWC), expectations ran high as to what Nokia might announce. Most of these focused on "wow" potential; such as perhaps the release of their full 41 MP Pureview camera in a Windows 8 phone.

    However, Nokia went in a little different direction. They focused more on expanding their phone lineup, including the Lumia line as well as new offerings in their Asha line.

    For purposes of this article, I would like to focus on what I might call the "middle ground" of Nokia's lineup, their newest offerings in the Lumia line. In my view, these phones appear to offer very unique value; a combination of true smartphone functionality and specs at very competitive price points. To hopefully make the point, I decided to compare some key specs on the Lumia 520 and 720, two phones announced at the MWC, along with the earlier-announced Lumia 620. As a reference point, I selected the iPhone 4S for comparison. Remember, the iPhone 4S is no slouch. It is second only to the iPhone5 in Apple's line. But, I felt it offered a solid basis for comparison as to how the new Lumias stack up.

    Have a look at the following table:

    Selected Nokia Models vs. iPhone 4S

     Lumia 520Lumia 620Lumia 720iPhone 4S
    ProcessorQualcomm Snapdragon S4, Dual-Core 1 GHzQualcomm Snapdragon S4, Dual-Core 1 GHzQualcomm Snapdragon S4, Dual-Core 1 GHzApple A5, Dual-Core 800 MHz
    Size119.9 x 64 x 9.9 mm (4.72 x 2.52 x 0.39 in)115.4 x 61.1 x 11 mm (4.54 x 2.41 x 0.43 in)127.9 x 67.5 x 9 mm (5.04 x 2.66 x 0.35 in)115.2 x 58.6 x 9.3 mm (4.54 x 2.31 x 0.37 in)
    Weight124 g (4.37 oz)127 g (4.48 oz)128 g (4.52 oz)140 g (4.94 oz)
    Screen Size4 inches3.8 Inches4.3 Inches3.5 inches
    Resolution800 x 480 (233 ppi)800 x 480 (246 ppi)800 x 480 (217 ppi)960 x 640 (330 ppi)
    RAM512 MB512 MB512 MB512 MB
    Internal Storage8 GB8 GB8 GB16 GB - 64 GB
    External Storage64 GB64 GB64 GBNone
    Rear Camera5 MP, 720p5 MP, 720p6.7 MP, 720p8 MP, 1080p
    Front CameraNone.3 MP1.3 MP.3 MP
    Battery1430 mAh1430 mAh2000 mAh1432 mAh
    Price (Unlocked)

    €139

    $289.99 (Approx. €223

    €249

    Approximately $450

    As can be seen, the Nokia offerings compete very well. The screen sizes are competitive, though the iPhone 4S has slightly better resolution. While the internal storage on the Lumias is slightly lower, it is expandable to a value equal to that possible with the 4S. The camera offerings are also competitive. Finally, the battery capacity is equal-to-superior.

    But more than that, these are full-fledged Lumias. They come with proprietary Nokia software and capabilities, such as the HERE suite (HERE maps, HERE Drive, and HERE transit). In the words of Stephen Elop, "We are bringing elements of our high-end flagship Lumia devices to more prices and therefore to more people."

    Summary and Conclusion

    Nokia is a world-class phone manufacturer, and has been for many years. If an individual does not believe this, likely they should steer clear of Nokia as an investment.

    I believe these new phones are evidence of Nokia's abilities. I love their design aesthetic and, quite frankly, the fact that they use Windows Phone. Between the freshness and vibrancy of the color palette that Nokia is featuring, and the innovative Live Tiles interface of Windows Phone 8, these phones offer differentiation in a smartphone world that at some level has become rather bland.

    With the phones I have featured in this article, Nokia has now done exactly what Elop said, brought many of the capabilities of their flagship devices within the reach of many more people. Apple has yet to do this. And some feel that Android phones at lower price points come off as plasticky and cheap. At some level, Nokia is offering great value to everyone from the father looking for a modestly-priced phone for a teenage son or daughter to a small business looking to provide a consistent platform for their employees.

    I believe this same strength should hold Nokia in good stead even if Microsoft develops their own smartphone. First of all, I believe that Nokia's combination of quality hardware and innovative proprietary features makes them a formidable competitor. Second, if Microsoft proves a fickle or even devious partner, Nokia would have the option to embrace Android as an alternative. One of my fellow Seeking Alpha contributors discussed this possibility in a recent article. I find myself in agreement with his view, as I find it hard to believe that Nokia, irrespective of their public position, does not at least have some secret "skunkworks" projects with respect to some "Plan B," and Android makes the most logical sense.

    In the final analysis, however, all of that is speculation and conjecture. What is known is what Nokia is producing today, a line of phones that cuts across a wide swath of the world's population. High-end? The Lumia 920 has received very positive reviews. Middle-ground? I would point to the lower-end Lumias features in this article. Lastly, do not ignore their Asha line; smartphone-like feature phones with impressive functionality at an extremely low price point. I believe all of this bodes well for their future.

    Disclosure: I am long NOK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Themes: long-ideas Stocks: AAPL, GOOG, MSFT, SSNLF, T, NOK
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