Shorting BlackBerry: What You Need To Know [View article]
Thanks for the article and taking the time to explain the situation. Whilst no doubt a number of SA readers are familiar with the process, I suspect there are those for whom this article added to their knowledge: myself included.
Over my twenty plus years of investing, I have run into a number of people (you even see them on the news channels sometimes) who really do not understand the mechanics or rational of shorting stocks.
I like your point about the idea that a broker might lend out stock for shorts to borrow, even though the broker might have a long position and bullish long-term view on the stock. This just reminds one that there are hundreds of reasons why an individual might hold, buy or sell a stock. Many of them are inevitably contrary to one's own actions, but that does not make one position right and the other wrong. They are simply different game plans.
My sense is that you are correct in assuming that the 28 June earnings may be less significant in the immediate price action than many seem to anticipate. Unless there is a real surprise (to the upside or downside) on sales (which might merit a pre-earnings announcement), it seems that the relatively recent launch of the Z10 and Q10 in respective markets will not provide enough 'data' to form a clear position on whether these products are gaining real traction. That said, the September earnings should provide a clearer measure. It will need more than a few dollars on the current price to create a 'short-squeeze,' which in turn will need clear figures to support the hypothesis that BBRY is once again showing strong and profitable growth.
Why I'm Worried About Nokia's Long-Term Prospects [View article]
@ George "Yesterday Royal Bank of Canada suggested that Nokia is likely to announce a profit warning to investors within the next few weeks, after worse than expected sales in Q2 2013."
RBC offered no evidence for this statement. Was it based on checking sales in Canada; North America only; global sales; did it include Nokia's other businesses apart from phones? Apparently not. The profit warning is based upon weaker than expected Lumia sales. Yet the end of the quarter is 30 June, with earnings released on 18 July, so how does RBC manage to work out future sales so precisely this far ahead of the end of the quarter?
This smacks of manipulation provided by another idiot analyst. Surprised you are influenced by it George, although I agree that the road ahead for Nokia is still a difficult one.
You are correct that QoQ net sales for China are up from 213M Eur to 256M Eur, compared to the YoY drop of -56% and that this is attributed largely to smart phone devices. Clearly, the overall trend on this country has reversed according to this data, which is good. Yet Europe tells a different story, where QoQ was down -26% and -34% YoY. Hardly stellar performance for a comeback!
Broadly, Nokia was down hard QoQ and YoY for revenue and units. Of course, the future lies in successfully migrating users to the Lumia and Asha platforms. My concern is not with the general strategy, but as I have said before, I do have concerns in the competence and speed of the implementation of this strategy. This is why I believe that the figures for the sales of new products is still good, but not amazing. If Nokia is to get back in the game for the long term, it needs to actually sell much larger volumes than currently is happening. I note that the outlook for increasing sales of smartphones is upbeat from Elop for next quarter's sales; however, I feel the base he is coming off is still pretty weak and time is running out. There are only so many times Elop can defend overall poor performance with the excuse of adverse competitive conditions, since he knows as well as any of us, those conditions are unlikely to improve going forward, unless Nokia is able to reverse this kind of blood letting. That is why I am less confident about Nokia than I was 6 months ago, when I thought their strategy was going to achieve more than it has done so far. However, I should be the first to admit that Nokia is doing a number of things right, but these numbers suggest overall it is not doing enough right IMO.
"The largest relative year-on-year decline in net sales was in Greater China followed by Europe and Middle East and Africa. In Greater China and Europe the net sales declines were primarily due to our Smart Devices business unit whereas in the Middle East and Africa the net sales decline was primarily due to our Mobile Phones business unit." Source: Nokia.com Interim Report, April 18, 2013.
As a long in NOK, I have 'readjusted' my position in light of the above and other initial points arising in the report, by reducing my core position. Why? Am I in panic mode? Not yet. However, I think the selling is likely to continue in light of this report for a few more weeks at least, largely since a number of analysts are going to give fuel to the shorts over the next few weeks for two reasons. Firstly, whatever the reasons, the growth in smartphones is not that impressive so far. This is not about whether the Lumia 920 is a beautiful phone, etc. It is simply about facts. How many of the units are selling and at what ASP? The ASP may be OK, but whilst one does not expect the volumes of Apple or Samsung at this stage, a 27% QoQ volume increase to 5.6 million units for an innovative 'get back in the game' range of phones is not all that impressive. If the world was so in love with the Lumia, one would expect growth well in excess of 50% and perhaps above 100% per quarter at this stage. In other words, the Lumia is a good product, but it may lack sufficient differentiators from the competition to make it a 'wow product.' This is not a product that is 'on fire.' Yes, the outlook suggests a significant increase is coming, but the fact that net sales declines in China and Europe were due to smart devices is not good (after all those are Lumias we are talking about); whichever way you read it. Nokia should be gaining sales in these two crucial regions at this stage not losing it. Yes, we all know about the supply problems (which are supposed to be history), but this market is not static and Nokia lost a serious amount of sales potential due to this mismanagement.
Last year, in a few comments on SA I acknowledged that 2013 would be a bumpy ride for Nokia, but that I was generally optimistic that things would look a lot, lot better by the end of the year. Now, I am not so sure. I agree that there is some good news in the report and that some aspects of Nokia's strategy are on track. However, whilst we all could anticipate continued losses in the mobile phones business (call it phased obsolescence), the degree and speed continues to be much more rapid than one would desire. More importantly, for Nokia to experience net sales declines in China and Europe during this past quarter is to my mind, very troubling.
I continue to hold part of my long core position in Nokia, although I anticipate that the pressure on this stock will see it dip below $3.00 in the next month or so; below that price, I shall be looking to increase my holdings if there are no negative game changers. When Nokia bust up from $3.67 to $4.50 on its pre-earnings announcement of 10 Jan 2013, many observers expected Nokia to be breaking through $5 shortly thereafter. For a while, it looked possible, as it traded up to $4.90 on 23 Jan 2013; but it is now down around 55% from that high.
I took most of my position in Nokia in the $2-$3 range and can enjoy some profit at this stage. I am not in panic mode, since I still hold a reduced core position and I believe Nokia still has the potential to do well in the long term. However, Nokia's performance this last quarter in China and Europe for smartphones is not anything to celebrate.
I remain in a reduced long position for Nokia. I look forward to reading some of the more in-depth articles on both sides of the market on SA in light of these latest earnings.
Think Twice Before Betting On Nokia At Current Price - Part 1 [View article]
# Timing Best Buy Looking forward to your next article. Based upon your profile, I should not doubt your experience in financial analysis of companies.
However, as has been pointed out by others commentators above, investors (as opposed to traders: who have shorter and different criteria to investors) are unlikely to base their decisions simply upon financial analysis, unless the message is a screaming buy or sell.
Whilst I do not think you are suggesting that a view on Nokia should be based simply upon historical financial data and analysis, I think you are perhaps a little too dismissive of the other important element in assessing a company's future; namely, the content and implementation of its corporate strategy.
Naturally, Nokia has more than one business strategy and each deserves consideration as elements within the corporate strategy. In other words, you cannot assess Nokia overall, without thinking about its two core businesses of networks(with Siemens) and its mobile-smart-phone business. Mapping is too small at present to be significant in the shorter term IMO.
Clearly, the hoped for return to glory amongst Nokia fans lies predominantly in its phone business. Essentially, does Nokia's strategy in this business area make sense and do its product offerings look as if they could generate profitable earnings against the intense competition in the various regional markets?
Secondly, does the implementation of Nokia's strategy so far in this business area show signs of success? At present, I should say Nokia scores very positively on its new and expanding range of products across a variety of price points (my only concern here is that it might be bringing too many products to market).
On other aspects of strategy implementation, I am less happy. The well documented delays, bottlenecks, supply constraints since last September cause me concern. When Apple has supply problems it deals with millions of units, for Nokia it involves tens of thousands of units in its high end offerings (China Mobile - New Year fiasco). It is almost as if Nokia lacks competence in this aspect of its marketing (distribution) as well as supply chain logistics. For a company that is used to handling millions of products per quarter, I find this odd. However, Nokia has been rationalising its manufacturing sites and setting up new production facilities in China and Asia, which seem to have a few teething problems in their ramp up. Hopefully, these will soon be sorted. Of course, everyone has their own opinion on how serious these problems are for the company and how soon they will be rectified. One thing for sure: promises are not enough.
In conclusion, whatever one's view of Nokia's phone strategy from high end smartphones to lower end phones, surely it is these factors which will determine one's view about whether Nokia is a good investment for the long term, rather than simply the financial figures of the past five years. Of course there is risk, that's always present in an investment and Nokia is still a highly risky investment at this time; but the potential returns are what attracts people to the stock for the long term based upon their belief that the company's executives and management have the competences to implement an effective strategy.
At present, I still have concerns about Nokia's strategy implementation record over the past 6 months, although it has not all been bad. As I have said previously, (along with many others at SA), 2013 is the 'make or break' year for Nokia, but one should not expect Nokia to achieve success instant success. The bottom line will be whether enough customers are drawn to buy large numbers of Nokia products in the phone markets that the company targets at a profitable level. The new products are now coming to market, now it is a question of how well Nokia markets them and how much customers feel they need them over and above competitors' offerings. No amount of navel gazing at the past five year's accounts will answer that question.
Timing Best Buy: I share your love of Facts as opposed to the rumor mill, speculation and personal bias that is the mark of so opinions in the stock market. However, facts have an element of 'time-decay' in both their value and relevance.
Why Nokia's Newest Lumia Phones Will Make Windows Phone 8 Successful [View article]
"Nokia shares slipped after Bernstein Research issued a report predicting weaker sales for the Lumia 920 — the flagship phone for the Windows Phone 8 operating system that the company launched last fall. Analyst Pierre Ferragu cited a “steep fall” in Google searches for the Lumia 920 as an indicator that “consumer interest has already flagged and now stands at very similar levels to the Lumia 800 last year and the Nokia N8 in 2011.” Source: http://bit.ly/ZiwkvM
It is unbelievable that these analysts are even allowed to print this kind of rubbish. So Pierre Ferragu believes his Google search indicates the sales and profit potential in 2013 of a multibillion company operating worldwide with dozens of products in addition to the Lumia 920. The scary thing is that his comments were viewed as instrumental in pulling the stock price lower!
The obsession with US sales of Lumia 920 phones by professional analysts is pathetic. Yes, there may be some problems in Nokia's management of its supply chain and marketing, but the above kind of 'analysis' is pathetic and should be consigned to the amateur blogger section.
#Connor Thank you for reminding people that Nokia is more than the 920: despite it being a great good phone.
# Gerry: My 'comments' of 13 Feb 2013 on the article 'What does Siemens' Exit from Nokia Siemens Network Mean for Nokia Investors, posted by Jacob Steinberg said the following:
"If Siemens were to seek the sale of their share of NSN as part of their broader refocusing strategy, it seems most likely that the buyer would come from the telecoms infrastructure industry, rather than simply a telecoms player (handsets) or elsewhere.
Assuming Nokia wanted to maintain its share and yet did not seek to finance the purchase of the other half via a debt issue, then clearly the field of contestants is somewhat limited.
Involvement by Alcatel-Lucent would be bad news for Nokia. Alcatel-Lucent has a lot of capable engineers, but the company right now is a mess and trying to manage its own survival.
That leaves Ericsson across the border from Finland and a past partner on projects like development of what became GSM. The problem here is that ERIC and NOK are arch-rivals these days. Of course, thinking longer term, global consolidation of this industry might make some think that and ERIC-NOK consolidation is the way to go; whilst what remains of Alcatel-Lucent might come later."
As you can see, whilst I also thought of an Ericsson-Nokia partnership, I tend to feel their rivalry and strategic positions rule out the option. However, like you I would not rule it out entirely.
Of course, my comments are not a particularly original set of observations, since people have been 'playing' with M&A candidates in this industry for years. However, it was interesting to read your take on a possible marriage between ERIC and NOK and your more detailed thoughts of what both parties bring to the table.
Last time I saw serious discussion about this relationship was back in 2002, when Ericsson stock crashed from its peak in the dot.com boom in the mid-$60 range to a low of $0.34 on 30 Sep 2002, whilst its bonds were in junk territory; a EUR3.2 Bn rescue via a stockholders' rights issue saved the day. At the time, like all telecoms infrastructure providers at the time, Nokia was well off its peaks of $60+ of the dot.com era, but was still trading at a healthy $12-$14 range at the time of Ericsson's rescue.
Some in the industry wandered if Nokia's network division (prior to Siemens partnership) might look to acquire Ericsson. But it proved to be no more than speculation. Whether that proves to be the case here, remains to be seen.
One point worth noting is that many mergers and acquisitions are driven by the financial big boys such as Goldman, MS, Barclays, etc., as any strategic concerns by the prospective partners. After all, these banks' M&A departments can earn hefty commissions if they pull off a marriage.
One other aspect of any Nokia Networks-Ericsson merger in the infrastructure business is a fact which I mentioned in my previous comments; namely, who else is there in this industry to partner?
Returning to my comments of 13 Feb 2013:
"In North America, Nortel is history, whilst Motorola Solutions (the old infrastructure business) is hardly likely to be in the running here.
The only other full service suppliers are Samsung from S. Korea whilst Huawei and ZTE come in from China. Cisco and Juniper are more specialized and unlikely to be looking to become full service providers, as are some other smaller players.
Hence, it would be very interesting to see how this might play out. Of course, there could be a 'joker' in the pack. However, I should rule out Microsoft, since this is a long way from their core business competences and for a number of reasons, I think it would be a very bad move. Having cash to throw around, think MSFT, GOOG, AAPL is not a reason to chuck it anywhere. Take note Mr Ballmer!
What is significant for Nokia is that depending on how such a switch of ownership plays out (if it takes place) will have a big impact upon Nokia's future; the wrong partner could really be a headache and resource drain on the company. Timing is everything, but so is your choice of dance partner!"
Gerry, for what it's worth, my current view is that Nokia's best option would be to fund an acquisition of the Siemen's share of NSN and maintain independence. However, for reasons which have been discussed previously on this board, there are hurdles to such a move; however, if NSN can keep its order book full, then the financial market might look favourably on such a deal. However, this is simple speculation!
The Past, Present, And Future Of Nokia [View article]
Sorry, but I am not sure what is the purpose of this article. The past and present could be a simple rehash of Wiki or any other historical record of Nokia, which has little relevance to today's situation. Anyone who has half way studied Nokia will know all this. Yes, Nokia has 'reinvented' itself successfully in the past, but that has no bearing on today's attempts. Different times, different places.
As for the future? Well, yes Nokia is facing a decisive year in 2013; but that's not news. Again, anyone who has followed Nokia over the past year or more knows this fact. Speculations by the jokers at Fortune : just that.
There are some good articles on Nokia which provide in-depth analysis or a different angle or observation to the norm. This is not one of them.
Many SA articles seem to be simply aiming for publication targets, rather than quality pieces that really add to the debate. Writing an article on SA should involve somewhat more rigor than displayed in this case. Another case where the comments are likely to be more informative than the article, when they arrive.
Why Steve Jobs' Big Blunder Is Starting To Cost Apple [View article]
@alandlou Welcome to the real world! :-)
'The Street' is often described as if it were a single conscious entity: it isn't. As you know, millions of shares and billions of dollars worth of stock are traded everyday by millions of individuals; all with their own agendas. Some represent institutions shuffling around billions with thousands of trades (many courtesy of their computer algorithms); others are experienced personal traders, with no real interest in a company's prospects or income statement, but who are looking for those price moves. Yet others are trying to create that 'perfectly balanced' long term portfolio, based on hours of analysis of historical accounting/financial data, mixed with an interpretation of various market forecasts, etc., etc. There are of course thousands of more categories.
In other words, whilst one can sometimes get angry with how 'The Street' or the 'pumpers' or 'the Vampire Squid' are 'manipulating the market or a stock,' most of the time all we see is the cumulative product of an enormous distribution of different opinions and trading/investing strategies.
Attributing a kind of collective consciousness to 'the market' or 'the Street' or 'the City,' etc. is an illusion. It is a 'fool's errand' to seek or expect fairness in the stock market. Those who do are usually punished. One may not agree with how a particular company's stock is moving, but most of the time, this simply reflects the interaction of multiple perceptions described above. Not wishing to sound like a Zen koan, but 'It is what it is.'
Is the short wrong, because they believe the price will move down 5% in the next week or few days or few hours? Assume they are wrong and the price goes up 5%, does this make the long right? Hardly, the same company might be bankrupt in 3 years time. The short's view shares little or nothing with the long's, whose horizons are 2 or 3 years into the future. So we end up with aggregate waves of buys and sells, whose individual components are never fathomed. After all, except in panics, when you sell or buy a stock, somebody is on the other side. It never matters who, but they have a different view to you; this is just as well, since if we all thought the same about a company's stock, it would not make much of a market.
You ask who gets to judge the Street or the analysts. Well, nobody gets to judge the Street beyond our own personal opinions. 'The Street' has as much consciousness about its actions as atoms in a collapsing star have about theirs.
On the AAPL shares, ask yourself what would your opinion be about their current value, if after Steve Jobs died on 11 Oct 2011, (when they closed at $394.47 adjusted close) they had not risen to $705.07 ($692.87adjusted close) on 21 Sep 2012, but had peaked at say $550 (a nice 38% rise). After all, the pressure on funds managers to hold a fair chunk of AAPL in their portfolios was getting pretty crazy in the first half of 2012, so one could ask how much of the price rise was really down to fundamental changes in business performance, versus portfolio adjustments and a degree of 'madness of crowds.'
Don't get me wrong. I think Apple is a great company, but it is also possible that 2012 saw an excess inflation in its price rise, that created excess euphoria in future stock price prospects, with some analysts talking up the $1,000 target. Such parabolic price rises are usually symptomatic of some kind of bubble, particularly, when one is talking about such a high market cap. base. In other words, despite all the doomsayers forecasting the demise of Apple with increased competition from Android, Samsung, Microsoft, Nokia, etc. and Apple's supposed 'loss of innovation,' Apple might be fairly priced at the moment with prospects of rising back up. Whether it does or not will depend upon too many factors to discuss here.
However, whilst it makes sense to consider the arguments put by both bulls and bears about the future of Apple, ultimately, we all need to undertake our own due diligence and analysis of the company (assuming we are not short term trading, where one is more interested in price factors) if we intend to consider investing, holding or even exiting the stock. After all, it is your money that is on the line and whether one analyst things A and another thinks B is really just so much noise.
If you free yourself from feeling angry with the analysts or the phantom that we perceive as the market, then you can focus upon what really matters, which is your personal assessment of whether Apple's share price rise or fall going forward over your given investment horizon.
As for the media, well remember what justifies their existence. Journalists are looking for gossip, scoops, stories and tend to mirror rather than uncover news most of the time. The talking heads are there to entertain more than to inform. Remember for quite a few years, everything about Apple that came out of their mouths was positive; you could not even suggest that Apple was ever going to stop growing. Of course, things change. Currently, Apple is no longer the flavour of the month and yes it is a case of 'flip-flop.' But such 'fair weather' friends are probably never worth listening to in the first place.
Alandlou, you say you have been investing since 2008. I have been in the game since the mid-90s as an individual investor (since the mid-80s via a broker). However, I am always learning something new each day, which makes it interesting; I certainly make mistakes. However, I have found that detachment from the 'noise' of the market helps keep my sanity; I don't expect the market to reward me or be fair. By thinking that way, I have found the experience less stressful, since if I need someone to blame when an investment goes wrong, I have only to look in the mirror.
What Does Siemens' Exit From Nokia Siemens Networks Mean For Nokia Investors [View article]
If Siemens were to seek the sale of their share of NSN as part of their broader refocusing strategy, it seems most likely that the buyer would come from the telecoms infrastructure industry, rather than simply a telecoms player (handsets) or elsewhere.
Assuming Nokia wanted to maintain its share and yet did not seek to finance the purchase of the other half via a debt issue, then clearly the field of contestants is somewhat limited.
Involvement by Alcatel-Lucent would be bad news for Nokia. Alcatel-Lucent has a lot of capable engineers, but the company right now is a mess and trying to manage its own survival.
That leaves Ericsson across the border from Finland and a past partner on projects like development of what became GSM. The problem here is that ERIC and NOK are arch-rivals these days. Of course, thinking longer term, global consolidation of this industry might make some think that and ERIC-NOK consolidtion is the way to go; whilst what remains of Alcatel-Lucent might come later.
One has to remember the political dimensions in this industry which are not prevalent in the consumer side of handsets. As we have seen with the US Congress reactions to Huawei's bid for business in the US, telecoms infrastructure is still a sensitive technology area. It was also one of the 'special industries' ring-fenced in the early days of the EU for restricted cross-country ownership, even within Europe. Although those days are now gone, the spectre of political sensitivity has not; especially when it comes to dealing with non-NATO members.
In North America, Nortel is history, whilst Motorola Solutions (the old infrastructure business) is hardly likely to be in the running here.
The only other full service suppliers are Samsung from S. Korea whilst Huawei and ZTE come in from China. Cisco and Juniper are more specialized and unlikely to be looking to become full service providers, as are some other smaller players.
Hence, it would be very interesting to see how this might play out. Of course, there could be a 'joker' in the pack. However, I should rule out Microsoft, since this is a long way from their core business competences and for a number of reasons, I think it would be a very bad move. Having cash to throw around, think MSFT, GOOG, AAPL is not a reason to chuck it anywhere. Take note Mr Ballmer!
What is significant for Nokia is that depending on how such a switch of ownership plays out (if it takes place) will have a big impact upon Nokia's future; the wrong partner could really be a headache and resource drain on the company. Timing is everything, but so is your choice of dance partner!
"The smartphone refresh by Blackberry (BBRY) took away some positive momentum in shares of Nokia (NOK)." Personally, I believe the main two factors that drove the stock price back down from its peak (more than BBRY) were:
1) The sale by institutions and individuals requiring a dividend stream from the company; they will have shifted funds to alternates. (which you acknowledge later).
2) The general volatility of this stock which has frequently dropped and then bounced back through 15-25% moves since its bottom last July. The short pressure also feeds this pattern.
The pull-back below $4.00 was something I mentioned in the last paragraph of my post of 24 Jan 2013, just after earnings around its peak at $4.70.
Whilst I agree that Nokia is likely to regain traction in its share price as sales of its Lumia and Asha ranges (aka: sell more units), I still nurse strong reservations about the marketing competence of this company. Having a great products(s) is necessary, but not sufficient condition for success.
Nokia keeps messing up its delivery and keeps lamenting problems in the supply chain. The latest fiasco over the Chinese New Year seems to be par for the course. Of course, the Nokia fanclub will shout 'foul' and say that it is just a question of time; but time is not on Nokia's side (talking here about phones vs. NSN).
As I have posted previously, there are some on this board who seem to think Nokia has a virtual monopoly with China mobile; nothing could be further from the truth.
Last October, I gave Nokia a year to prove whether it was recovering on simply waving its arms as it drowned; I also acknowledged that it would have a 'bumpy ride' over that year. At the time, I was quietly confident that Nokia would pull it off, based on its new Lumia range and the Windows 8 strategy. Now, I am less confident and more dependent on hope rather than clear signs.
For a global corporation, Nokia is not executing its marketing strategy very effectively, which in turn reflects problems in management. This is not about blaming Elop, although he is ultimately responsible. However, somewhere in top management at Nokia there seems a vacuum in the skills set necessary to market the excellent products effectively.
It was bad enough watching Nokia slide into near bankruptcy from 2007-2012; it would be doubly tragic, if now they have products to compete effectively in the market, they still went under because they could not get the things out to the market in sufficient numbers or within time.
Nokia fans will maybe wait for their beloved Lumia, but the vast marjority of the market is far more fickle. Time is not a luxury Nokia can afford to squander anymore.
Having the CFO make excuses about the China problems, tells us a lot about the lack of a marketing head at Nokia; this is not a finance issue, it is a marketing issue.
I remain long Nokia, but I wish they would start to become more professional in their marketing.
1.4 Billion Smartphones In Use By End Of 2013 - 'A Race Of 2 Horses And 2 Ponies' [View article]
@pbsurf
"There are only, and have really only ever been 2-3 car makers for a REASON."
1) Much more than 2-3 Car Makers Globally: Given we are discussing the global phone market, to keep like with like there way more and always have been more than 2-3 car makers globally. In the US it is true that GM, Ford and Chrysler are the indigenous players, but globally, the rankings for 2011 in cars are: 1) Volkswagen 2) GM 3) Toyota 4) Hyundai 5) Nissan 6) PSA 7) Ford 8) Renault etc.
If Chapter 11 were not operating and French subsidies for PSA and Renault things would be rather different.
In fact, the concentration ratio of the global car industry has actually decreased over the past 25 years as the Japanese and South Koreans have developed from international exporters to fully integrated multinational or global concerns. In turn, they will be joined by the Chinese, who actually produced more than twice the number of cars rolling off the line at Detroit during 2011, although about 55% was for GM plus European and Japanese multinationals. The rest was for their home grown manufacturers.
2) Telecoms Players: AAPL, Samsung: Specifically on the telecoms players, although I agree with you that AAPL and Samsung enjoy economies of scale, so does Nokia which produced 86.3 million mobile devices in Q4 2012, which compares to Apple's 47.8million iPhones for 13 week fiscal Q1 just announced. Of course Samsung outstrips them both.
I hold positions in both NOK and AAPL, but I would be surprised if NOK was not matching AAPL in this area. Of course, where AAPL does score above NOK is on margins; but that might prove to be a two-edged sword in time.
1.4 Billion Smartphones In Use By End Of 2013 - 'A Race Of 2 Horses And 2 Ponies' [View article]
The dominance of Android and iOS through 2013 is a reasonable assumption. However, the five year projection is a case of plain simple minded projections.
5 Years ago in 2007 was when Android and Apple launched their respective operating systems; now look at them and contrast that with Symbian.
So many analysts and market research companies are 'blinkered' if you will excuse the equine pun amongst this talk of horses and ponies. They seem convinced that it is a re-run of the Microsoft story with Windows enjoying the first mover advantage. Whilst not impossible, the dynamics of this industry and its links to broader ecosystems makes it equally possible that:
1) Windows may catch up a whole lot more than they imagine;
2) and/or a completely new OS comes along which blows the mediocre Android out of the water and leaves iOS in the same kind of 'closed loop' niche that Apple created for themselves with personal computers.
The central role that mobile information handling plays in our society in both the consumer and business environments is enormous and growing all the time. Hence, I think it is naive to believe that the current leaders in this race have no serious challengers.
An essential characteristic of information and communications technologies is that they are constantly subjected to 'technological disruptions,' which frequently introduce new players and redefine products and markets. Anyone who thinks the OS environment for mobile communications devices is not going to be subject to similar discontinuities over the next five years is probably suffering from 'technology myopia.'
Totally agree on your views about 5 years versus 6 months in this sector, especially for Nokia.
Also, NSN should actually continue to do well in China, since it has over 20 years of working with China Mobile and was one of the first companies to support the operator's initial GSM network. Of course, in those days GSM was dominated by Ericsson and Nokia as co-lead developers of the commercial technology.
Good to see also that NSN is signed up for deployment of TD-LTE in 3 cities in China with China Mobile. Last I saw, NSN was listed with 5 out of 11 TD-LTE network launches worldwide at this time.
This strength that has returned to NSN is one reason why I am less convinced that an IPO is in the pipe; although if it is, I should expect it to be driven more now by Siemens; although I could be wrong.
Thanks for the additions, all of which are very valid observations.
I agree with you about the hurdles and as we have seen with the move by the House Intelligence Committee to recommend that the Committee on Foreign Investment in the USA should block any deals by US operators involving Huawei or ZTE. This in itself is a huge topic in terms of where it goes for Sino-US trade relations, etc.
What makes it different to the same kind of xenophobic protectionism displayed by the US during the 1970s and early 80s towards Japanese electronics and car manufacturers (which simply led to a Trojan Horse invasion) is the security aspect. As you point out, this also embraces more than simply data espionage, but embraces issues about human rights, etc.
On the Chinese cloud issue, I think this is less important to the business of selling mobile phones (especially smartphones) in many emerging economies, such as India, South-East Asia (ex. S. Korea & Singapore), the ME, Africa and parts of South America. Providing the handset operates on the chosen operators OS, one is talking about price competition as the key differentiator. Being glib for a moment, one could argue that with 5 billion people living in the emerging economies (where legal niceties are taken less seriously), China has more than enough of the globe to keep it humming. After all, Europe and N.America represent about 1/7th of the world's population. In much of sub-Saharan Africa, Chinese mining and agricultural interests have exploded in the past decade with Chinese soft loan programs, so that China is now Africa's largest trading partner ahead of the US and UK. The diplomatic and business relationships enjoyed by China now make it a strong choice of partner in areas such as telecoms infrastructure over many US or European companies (despite their long history in the region), partly since the Chinese are not tainted with the whiff of neo-colonial interests or Pax Americana economic imperialism.
On the inevitable march of international labor, I agree that this is bound to play out in the decades ahead. Indeed, it is already present in places like Vietnam, Indonesia and the Philippines, as well as India. However, although part of China's workforce is celebrating the economic boom, at least 50% are still living outside cities, many with much lower wages than the average. Clearly, this is changing rapidly as China's urbanization grows, but given the numbers, I think China will be able to field a relatively cheap labor force relative to the west for a decade or so, combined with a higher standard of education than normally found in some of the lower cost countries.
Finally, I agree that NSN has an advantage in 4G LTE contracts relative to the Chinese in North America and Europe, setting aside the usual competition from Ericsson and Alcatel-Lucent for a moment. I am less sure about Russia and the ex-Soviet Union, although NSN has a track record in the region. However, going forward, I do not think the Chinese government will give 4G infrastructure contracts to Alcatel-Lucent, Ericsson and Nokia NSN ad infinitum; somewhere they will seek reciprocity. Maybe not today, but sooner rather than later. Cisco is already a likely Chinese government target for the Huawei affair. After all, telecoms infrastructure contracts have always had a high component of political input in choosing partners and is a very different business (as you know) to the handset business with its consumer facing markets.
Shorting BlackBerry: What You Need To Know [View article]
Over my twenty plus years of investing, I have run into a number of people (you even see them on the news channels sometimes) who really do not understand the mechanics or rational of shorting stocks.
I like your point about the idea that a broker might lend out stock for shorts to borrow, even though the broker might have a long position and bullish long-term view on the stock. This just reminds one that there are hundreds of reasons why an individual might hold, buy or sell a stock. Many of them are inevitably contrary to one's own actions, but that does not make one position right and the other wrong. They are simply different game plans.
My sense is that you are correct in assuming that the 28 June earnings may be less significant in the immediate price action than many seem to anticipate. Unless there is a real surprise (to the upside or downside) on sales (which might merit a pre-earnings announcement), it seems that the relatively recent launch of the Z10 and Q10 in respective markets will not provide enough 'data' to form a clear position on whether these products are gaining real traction. That said, the September earnings should provide a clearer measure. It will need more than a few dollars on the current price to create a 'short-squeeze,' which in turn will need clear figures to support the hypothesis that BBRY is once again showing strong and profitable growth.
Hopefully we shall see that by year end.
Thanks again.
I remain long BBRY.
Why I'm Worried About Nokia's Long-Term Prospects [View article]
"Yesterday Royal Bank of Canada suggested that Nokia is likely to announce a profit warning to investors within the next few weeks, after worse than expected sales in Q2 2013."
RBC offered no evidence for this statement. Was it based on checking sales in Canada; North America only; global sales; did it include Nokia's other businesses apart from phones? Apparently not. The profit warning is based upon weaker than expected Lumia sales. Yet the end of the quarter is 30 June, with earnings released on 18 July, so how does RBC manage to work out future sales so precisely this far ahead of the end of the quarter?
This smacks of manipulation provided by another idiot analyst. Surprised you are influenced by it George, although I agree that the road ahead for Nokia is still a difficult one.
I remain long Nokia.
Nokia: There Is No Need To Panic [View article]
Thanks for your comment.
You are correct that QoQ net sales for China are up from 213M Eur to 256M Eur, compared to the YoY drop of -56% and that this is attributed largely to smart phone devices. Clearly, the overall trend on this country has reversed according to this data, which is good. Yet Europe tells a different story, where QoQ was down -26% and -34% YoY. Hardly stellar performance for a comeback!
Broadly, Nokia was down hard QoQ and YoY for revenue and units. Of course, the future lies in successfully migrating users to the Lumia and Asha platforms. My concern is not with the general strategy, but as I have said before, I do have concerns in the competence and speed of the implementation of this strategy. This is why I believe that the figures for the sales of new products is still good, but not amazing. If Nokia is to get back in the game for the long term, it needs to actually sell much larger volumes than currently is happening. I note that the outlook for increasing sales of smartphones is upbeat from Elop for next quarter's sales; however, I feel the base he is coming off is still pretty weak and time is running out. There are only so many times Elop can defend overall poor performance with the excuse of adverse competitive conditions, since he knows as well as any of us, those conditions are unlikely to improve going forward, unless Nokia is able to reverse this kind of blood letting.
That is why I am less confident about Nokia than I was 6 months ago, when I thought their strategy was going to achieve more than it has done so far. However, I should be the first to admit that Nokia is doing a number of things right, but these numbers suggest overall it is not doing enough right IMO.
Nokia: There Is No Need To Panic [View article]
Source: Nokia.com Interim Report, April 18, 2013.
As a long in NOK, I have 'readjusted' my position in light of the above and other initial points arising in the report, by reducing my core position. Why? Am I in panic mode? Not yet. However, I think the selling is likely to continue in light of this report for a few more weeks at least, largely since a number of analysts are going to give fuel to the shorts over the next few weeks for two reasons. Firstly, whatever the reasons, the growth in smartphones is not that impressive so far. This is not about whether the Lumia 920 is a beautiful phone, etc. It is simply about facts. How many of the units are selling and at what ASP? The ASP may be OK, but whilst one does not expect the volumes of Apple or Samsung at this stage, a 27% QoQ volume increase to 5.6 million units for an innovative 'get back in the game' range of phones is not all that impressive. If the world was so in love with the Lumia, one would expect growth well in excess of 50% and perhaps above 100% per quarter at this stage. In other words, the Lumia is a good product, but it may lack sufficient differentiators from the competition to make it a 'wow product.' This is not a product that is 'on fire.' Yes, the outlook suggests a significant increase is coming, but the fact that net sales declines in China and Europe were due to smart devices is not good (after all those are Lumias we are talking about); whichever way you read it. Nokia should be gaining sales in these two crucial regions at this stage not losing it. Yes, we all know about the supply problems (which are supposed to be history), but this market is not static and Nokia lost a serious amount of sales potential due to this mismanagement.
Last year, in a few comments on SA I acknowledged that 2013 would be a bumpy ride for Nokia, but that I was generally optimistic that things would look a lot, lot better by the end of the year. Now, I am not so sure. I agree that there is some good news in the report and that some aspects of Nokia's strategy are on track. However, whilst we all could anticipate continued losses in the mobile phones business (call it phased obsolescence), the degree and speed continues to be much more rapid than one would desire. More importantly, for Nokia to experience net sales declines in China and Europe during this past quarter is to my mind, very troubling.
I continue to hold part of my long core position in Nokia, although I anticipate that the pressure on this stock will see it dip below $3.00 in the next month or so; below that price, I shall be looking to increase my holdings if there are no negative game changers. When Nokia bust up from $3.67 to $4.50 on its pre-earnings announcement of 10 Jan 2013, many observers expected Nokia to be breaking through $5 shortly thereafter. For a while, it looked possible, as it traded up to $4.90 on 23 Jan 2013; but it is now down around 55% from that high.
I took most of my position in Nokia in the $2-$3 range and can enjoy some profit at this stage. I am not in panic mode, since I still hold a reduced core position and I believe Nokia still has the potential to do well in the long term. However, Nokia's performance this last quarter in China and Europe for smartphones is not anything to celebrate.
I remain in a reduced long position for Nokia. I look forward to reading some of the more in-depth articles on both sides of the market on SA in light of these latest earnings.
Think Twice Before Betting On Nokia At Current Price - Part 1 [View article]
Looking forward to your next article. Based upon your profile, I should not doubt your experience in financial analysis of companies.
However, as has been pointed out by others commentators above, investors (as opposed to traders: who have shorter and different criteria to investors) are unlikely to base their decisions simply upon financial analysis, unless the message is a screaming buy or sell.
Whilst I do not think you are suggesting that a view on Nokia should be based simply upon historical financial data and analysis, I think you are perhaps a little too dismissive of the other important element in assessing a company's future; namely, the content and implementation of its corporate strategy.
Naturally, Nokia has more than one business strategy and each deserves consideration as elements within the corporate strategy. In other words, you cannot assess Nokia overall, without thinking about its two core businesses of networks(with Siemens) and its mobile-smart-phone business. Mapping is too small at present to be significant in the shorter term IMO.
Clearly, the hoped for return to glory amongst Nokia fans lies predominantly in its phone business. Essentially, does Nokia's strategy in this business area make sense and do its product offerings look as if they could generate profitable earnings against the intense competition in the various regional markets?
Secondly, does the implementation of Nokia's strategy so far in this business area show signs of success? At present, I should say Nokia scores very positively on its new and expanding range of products across a variety of price points (my only concern here is that it might be bringing too many products to market).
On other aspects of strategy implementation, I am less happy. The well documented delays, bottlenecks, supply constraints since last September cause me concern. When Apple has supply problems it deals with millions of units, for Nokia it involves tens of thousands of units in its high end offerings (China Mobile - New Year fiasco). It is almost as if Nokia lacks competence in this aspect of its marketing (distribution) as well as supply chain logistics.
For a company that is used to handling millions of products per quarter, I find this odd. However, Nokia has been rationalising its manufacturing sites and setting up new production facilities in China and Asia, which seem to have a few teething problems in their ramp up. Hopefully, these will soon be sorted. Of course, everyone has their own opinion on how serious these problems are for the company and how soon they will be rectified. One thing for sure: promises are not enough.
In conclusion, whatever one's view of Nokia's phone strategy from high end smartphones to lower end phones, surely it is these factors which will determine one's view about whether Nokia is a good investment for the long term, rather than simply the financial figures of the past five years. Of course there is risk, that's always present in an investment and Nokia is still a highly risky investment at this time; but the potential returns are what attracts people to the stock for the long term based upon their belief that the company's executives and management have the competences to implement an effective strategy.
At present, I still have concerns about Nokia's strategy implementation record over the past 6 months, although it has not all been bad. As I have said previously, (along with many others at SA), 2013 is the 'make or break' year for Nokia, but one should not expect Nokia to achieve success instant success. The bottom line will be whether enough customers are drawn to buy large numbers of Nokia products in the phone markets that the company targets at a profitable level. The new products are now coming to market, now it is a question of how well Nokia markets them and how much customers feel they need them over and above competitors' offerings. No amount of navel gazing at the past five year's accounts will answer that question.
Timing Best Buy: I share your love of Facts as opposed to the rumor mill, speculation and personal bias that is the mark of so opinions in the stock market. However, facts have an element of 'time-decay' in both their value and relevance.
I remain long Nokia.
Why Nokia's Newest Lumia Phones Will Make Windows Phone 8 Successful [View article]
Analyst Pierre Ferragu cited a “steep fall” in Google searches for the Lumia 920 as an indicator that “consumer interest has already flagged and now stands at very similar levels to the Lumia 800 last year and the Nokia N8 in 2011.”
Source: http://bit.ly/ZiwkvM
It is unbelievable that these analysts are even allowed to print this kind of rubbish. So Pierre Ferragu believes his Google search indicates the sales and profit potential in 2013 of a multibillion company operating worldwide with dozens of products in addition to the Lumia 920. The scary thing is that his comments were viewed as instrumental in pulling the stock price lower!
The obsession with US sales of Lumia 920 phones by professional analysts is pathetic. Yes, there may be some problems in Nokia's management of its supply chain and marketing, but the above kind of 'analysis' is pathetic and should be consigned to the amateur blogger section.
#Connor
Thank you for reminding people that Nokia is more than the 920: despite it being a great good phone.
Ericsson And Nokia: Erokia? [View article]
My 'comments' of 13 Feb 2013 on the article 'What does Siemens' Exit from Nokia Siemens Network Mean for Nokia Investors, posted by Jacob Steinberg said the following:
"If Siemens were to seek the sale of their share of NSN as part of their broader refocusing strategy, it seems most likely that the buyer would come from the telecoms infrastructure industry, rather than simply a telecoms player (handsets) or elsewhere.
Assuming Nokia wanted to maintain its share and yet did not seek to finance the purchase of the other half via a debt issue, then clearly the field of contestants is somewhat limited.
Involvement by Alcatel-Lucent would be bad news for Nokia. Alcatel-Lucent has a lot of capable engineers, but the company right now is a mess and trying to manage its own survival.
That leaves Ericsson across the border from Finland and a past partner on projects like development of what became GSM. The problem here is that ERIC and NOK are arch-rivals these days. Of course, thinking longer term, global consolidation of this industry might make some think that and ERIC-NOK consolidation is the way to go; whilst what remains of Alcatel-Lucent might come later."
As you can see, whilst I also thought of an Ericsson-Nokia partnership, I tend to feel their rivalry and strategic positions rule out the option. However, like you I would not rule it out entirely.
Of course, my comments are not a particularly original set of observations, since people have been 'playing' with M&A candidates in this industry for years. However, it was interesting to read your take on a possible marriage between ERIC and NOK and your more detailed thoughts of what both parties bring to the table.
Last time I saw serious discussion about this relationship was back in 2002, when Ericsson stock crashed from its peak in the dot.com boom in the mid-$60 range to a low of $0.34 on 30 Sep 2002, whilst its bonds were in junk territory; a EUR3.2 Bn rescue via a stockholders' rights issue saved the day. At the time, like all telecoms infrastructure providers at the time, Nokia was well off its peaks of $60+ of the dot.com era, but was still trading at a healthy $12-$14 range at the time of Ericsson's rescue.
Some in the industry wandered if Nokia's network division (prior to Siemens partnership) might look to acquire Ericsson. But it proved to be no more than speculation. Whether that proves to be the case here, remains to be seen.
One point worth noting is that many mergers and acquisitions are driven by the financial big boys such as Goldman, MS, Barclays, etc., as any strategic concerns by the prospective partners. After all, these banks' M&A departments can earn hefty commissions if they pull off a marriage.
One other aspect of any Nokia Networks-Ericsson merger in the infrastructure business is a fact which I mentioned in my previous comments; namely, who else is there in this industry to partner?
Returning to my comments of 13 Feb 2013:
"In North America, Nortel is history, whilst Motorola Solutions (the old infrastructure business) is hardly likely to be in the running here.
The only other full service suppliers are Samsung from S. Korea whilst Huawei and ZTE come in from China. Cisco and Juniper are more specialized and unlikely to be looking to become full service providers, as are some other smaller players.
Hence, it would be very interesting to see how this might play out. Of course, there could be a 'joker' in the pack. However, I should rule out Microsoft, since this is a long way from their core business competences and for a number of reasons, I think it would be a very bad move. Having cash to throw around, think MSFT, GOOG, AAPL is not a reason to chuck it anywhere. Take note Mr Ballmer!
What is significant for Nokia is that depending on how such a switch of ownership plays out (if it takes place) will have a big impact upon Nokia's future; the wrong partner could really be a headache and resource drain on the company. Timing is everything, but so is your choice of dance partner!"
Gerry, for what it's worth, my current view is that Nokia's best option would be to fund an acquisition of the Siemen's share of NSN and maintain independence. However, for reasons which have been discussed previously on this board, there are hurdles to such a move; however, if NSN can keep its order book full, then the financial market might look favourably on such a deal. However, this is simple speculation!
I remain long Nokia.
The Past, Present, And Future Of Nokia [View article]
As for the future? Well, yes Nokia is facing a decisive year in 2013; but that's not news. Again, anyone who has followed Nokia over the past year or more knows this fact. Speculations by the jokers at Fortune : just that.
There are some good articles on Nokia which provide in-depth analysis or a different angle or observation to the norm. This is not one of them.
Many SA articles seem to be simply aiming for publication targets, rather than quality pieces that really add to the debate. Writing an article on SA should involve somewhat more rigor than displayed in this case. Another case where the comments are likely to be more informative than the article, when they arrive.
Why Steve Jobs' Big Blunder Is Starting To Cost Apple [View article]
Welcome to the real world! :-)
'The Street' is often described as if it were a single conscious entity: it isn't. As you know, millions of shares and billions of dollars worth of stock are traded everyday by millions of individuals; all with their own agendas. Some represent institutions shuffling around billions with thousands of trades (many courtesy of their computer algorithms); others are experienced personal traders, with no real interest in a company's prospects or income statement, but who are looking for those price moves. Yet others are trying to create that 'perfectly balanced' long term portfolio, based on hours of analysis of historical accounting/financial data, mixed with an interpretation of various market forecasts, etc., etc. There are of course thousands of more categories.
In other words, whilst one can sometimes get angry with how 'The Street' or the 'pumpers' or 'the Vampire Squid' are 'manipulating the market or a stock,' most of the time all we see is the cumulative product of an enormous distribution of different opinions and trading/investing strategies.
Attributing a kind of collective consciousness to 'the market' or 'the Street' or 'the City,' etc. is an illusion. It is a 'fool's errand' to seek or expect fairness in the stock market. Those who do are usually punished. One may not agree with how a particular company's stock is moving, but most of the time, this simply reflects the interaction of multiple perceptions described above. Not wishing to sound like a Zen koan, but 'It is what it is.'
Is the short wrong, because they believe the price will move down 5% in the next week or few days or few hours? Assume they are wrong and the price goes up 5%, does this make the long right? Hardly, the same company might be bankrupt in 3 years time. The short's view shares little or nothing with the long's, whose horizons are 2 or 3 years into the future. So we end up with aggregate waves of buys and sells, whose individual components are never fathomed. After all, except in panics, when you sell or buy a stock, somebody is on the other side. It never matters who, but they have a different view to you; this is just as well, since if we all thought the same about a company's stock, it would not make much of a market.
You ask who gets to judge the Street or the analysts. Well, nobody gets to judge the Street beyond our own personal opinions. 'The Street' has as much consciousness about its actions as atoms in a collapsing star have about theirs.
On the AAPL shares, ask yourself what would your opinion be about their current value, if after Steve Jobs died on 11 Oct 2011, (when they closed at $394.47 adjusted close) they had not risen to $705.07 ($692.87adjusted close) on 21 Sep 2012, but had peaked at say $550 (a nice 38% rise). After all, the pressure on funds managers to hold a fair chunk of AAPL in their portfolios was getting pretty crazy in the first half of 2012, so one could ask how much of the price rise was really down to fundamental changes in business performance, versus portfolio adjustments and a degree of 'madness of crowds.'
Don't get me wrong. I think Apple is a great company, but it is also possible that 2012 saw an excess inflation in its price rise, that created excess euphoria in future stock price prospects, with some analysts talking up the $1,000 target. Such parabolic price rises are usually symptomatic of some kind of bubble, particularly, when one is talking about such a high market cap. base. In other words, despite all the doomsayers forecasting the demise of Apple with increased competition from Android, Samsung, Microsoft, Nokia, etc. and Apple's supposed 'loss of innovation,' Apple might be fairly priced at the moment with prospects of rising back up. Whether it does or not will depend upon too many factors to discuss here.
However, whilst it makes sense to consider the arguments put by both bulls and bears about the future of Apple, ultimately, we all need to undertake our own due diligence and analysis of the company (assuming we are not short term trading, where one is more interested in price factors) if we intend to consider investing, holding or even exiting the stock. After all, it is your money that is on the line and whether one analyst things A and another thinks B is really just so much noise.
If you free yourself from feeling angry with the analysts or the phantom that we perceive as the market, then you can focus upon what really matters, which is your personal assessment of whether Apple's share price rise or fall going forward over your given investment horizon.
As for the media, well remember what justifies their existence. Journalists are looking for gossip, scoops, stories and tend to mirror rather than uncover news most of the time. The talking heads are there to entertain more than to inform. Remember for quite a few years, everything about Apple that came out of their mouths was positive; you could not even suggest that Apple was ever going to stop growing. Of course, things change. Currently, Apple is no longer the flavour of the month and yes it is a case of 'flip-flop.' But such 'fair weather' friends are probably never worth listening to in the first place.
Alandlou, you say you have been investing since 2008. I have been in the game since the mid-90s as an individual investor (since the mid-80s via a broker). However, I am always learning something new each day, which makes it interesting; I certainly make mistakes. However, I have found that detachment from the 'noise' of the market helps keep my sanity; I don't expect the market to reward me or be fair. By thinking that way, I have found the experience less stressful, since if I need someone to blame when an investment goes wrong, I have only to look in the mirror.
I hope this helps.
I remain long AAPL at this time.
What Does Siemens' Exit From Nokia Siemens Networks Mean For Nokia Investors [View article]
Assuming Nokia wanted to maintain its share and yet did not seek to finance the purchase of the other half via a debt issue, then clearly the field of contestants is somewhat limited.
Involvement by Alcatel-Lucent would be bad news for Nokia. Alcatel-Lucent has a lot of capable engineers, but the company right now is a mess and trying to manage its own survival.
That leaves Ericsson across the border from Finland and a past partner on projects like development of what became GSM. The problem here is that ERIC and NOK are arch-rivals these days. Of course, thinking longer term, global consolidation of this industry might make some think that and ERIC-NOK consolidtion is the way to go; whilst what remains of Alcatel-Lucent might come later.
One has to remember the political dimensions in this industry which are not prevalent in the consumer side of handsets. As we have seen with the US Congress reactions to Huawei's bid for business in the US, telecoms infrastructure is still a sensitive technology area. It was also one of the 'special industries' ring-fenced in the early days of the EU for restricted cross-country ownership, even within Europe. Although those days are now gone, the spectre of political sensitivity has not; especially when it comes to dealing with non-NATO members.
In North America, Nortel is history, whilst Motorola Solutions (the old infrastructure business) is hardly likely to be in the running here.
The only other full service suppliers are Samsung from S. Korea whilst Huawei and ZTE come in from China. Cisco and Juniper are more specialized and unlikely to be looking to become full service providers, as are some other smaller players.
Hence, it would be very interesting to see how this might play out. Of course, there could be a 'joker' in the pack. However, I should rule out Microsoft, since this is a long way from their core business competences and for a number of reasons, I think it would be a very bad move. Having cash to throw around, think MSFT, GOOG, AAPL is not a reason to chuck it anywhere. Take note Mr Ballmer!
What is significant for Nokia is that depending on how such a switch of ownership plays out (if it takes place) will have a big impact upon Nokia's future; the wrong partner could really be a headache and resource drain on the company. Timing is everything, but so is your choice of dance partner!
5 Reasons Nokia Has More Upside [View article]
I have to disagree with your opening statement:
"The smartphone refresh by Blackberry (BBRY) took away some positive momentum in shares of Nokia (NOK)."
Personally, I believe the main two factors that drove the stock price back down from its peak (more than BBRY) were:
1) The sale by institutions and individuals requiring a dividend stream from the company; they will have shifted funds to alternates. (which you acknowledge later).
2) The general volatility of this stock which has frequently dropped and then bounced back through 15-25% moves since its bottom last July. The short pressure also feeds this pattern.
The pull-back below $4.00 was something I mentioned in the last paragraph of my post of 24 Jan 2013, just after earnings around its peak at $4.70.
Whilst I agree that Nokia is likely to regain traction in its share price as sales of its Lumia and Asha ranges (aka: sell more units), I still nurse strong reservations about the marketing competence of this company. Having a great products(s) is necessary, but not sufficient condition for success.
Nokia keeps messing up its delivery and keeps lamenting problems in the supply chain. The latest fiasco over the Chinese New Year seems to be par for the course. Of course, the Nokia fanclub will shout 'foul' and say that it is just a question of time; but time is not on Nokia's side (talking here about phones vs. NSN).
As I have posted previously, there are some on this board who seem to think Nokia has a virtual monopoly with China mobile; nothing could be further from the truth.
Last October, I gave Nokia a year to prove whether it was recovering on simply waving its arms as it drowned; I also acknowledged that it would have a 'bumpy ride' over that year. At the time, I was quietly confident that Nokia would pull it off, based on its new Lumia range and the Windows 8 strategy. Now, I am less confident and more dependent on hope rather than clear signs.
For a global corporation, Nokia is not executing its marketing strategy very effectively, which in turn reflects problems in management. This is not about blaming Elop, although he is ultimately responsible. However, somewhere in top management at Nokia there seems a vacuum in the skills set necessary to market the excellent products effectively.
It was bad enough watching Nokia slide into near bankruptcy from 2007-2012; it would be doubly tragic, if now they have products to compete effectively in the market, they still went under because they could not get the things out to the market in sufficient numbers or within time.
Nokia fans will maybe wait for their beloved Lumia, but the vast marjority of the market is far more fickle. Time is not a luxury Nokia can afford to squander anymore.
Having the CFO make excuses about the China problems, tells us a lot about the lack of a marketing head at Nokia; this is not a finance issue, it is a marketing issue.
I remain long Nokia, but I wish they would start to become more professional in their marketing.
1.4 Billion Smartphones In Use By End Of 2013 - 'A Race Of 2 Horses And 2 Ponies' [View article]
"There are only, and have really only ever been 2-3 car makers for a REASON."
1) Much more than 2-3 Car Makers Globally:
Given we are discussing the global phone market, to keep like with like there way more and always have been more than 2-3 car makers globally. In the US it is true that GM, Ford and Chrysler are the indigenous players, but globally, the rankings for 2011 in cars are:
1) Volkswagen
2) GM
3) Toyota
4) Hyundai
5) Nissan
6) PSA
7) Ford
8) Renault
etc.
If Chapter 11 were not operating and French subsidies for PSA and Renault things would be rather different.
In fact, the concentration ratio of the global car industry has actually decreased over the past 25 years as the Japanese and South Koreans have developed from international exporters to fully integrated multinational or global concerns. In turn, they will be joined by the Chinese, who actually produced more than twice the number of cars rolling off the line at Detroit during 2011, although about 55% was for GM plus European and Japanese multinationals. The rest was for their home grown manufacturers.
2) Telecoms Players: AAPL, Samsung:
Specifically on the telecoms players, although I agree with you that AAPL and Samsung enjoy economies of scale, so does Nokia which produced 86.3 million mobile devices in Q4 2012, which compares to Apple's 47.8million iPhones for 13 week fiscal Q1 just announced. Of course Samsung outstrips them both.
I hold positions in both NOK and AAPL, but I would be surprised if NOK was not matching AAPL in this area. Of course, where AAPL does score above NOK is on margins; but that might prove to be a two-edged sword in time.
1.4 Billion Smartphones In Use By End Of 2013 - 'A Race Of 2 Horses And 2 Ponies' [View article]
5 Years ago in 2007 was when Android and Apple launched their respective operating systems; now look at them and contrast that with Symbian.
So many analysts and market research companies are 'blinkered' if you will excuse the equine pun amongst this talk of horses and ponies. They seem convinced that it is a re-run of the Microsoft story with Windows enjoying the first mover advantage. Whilst not impossible, the dynamics of this industry and its links to broader ecosystems makes it equally possible that:
1) Windows may catch up a whole lot more than they imagine;
2) and/or a completely new OS comes along which blows the mediocre Android out of the water and leaves iOS in the same kind of 'closed loop' niche that Apple created for themselves with personal computers.
The central role that mobile information handling plays in our society in both the consumer and business environments is enormous and growing all the time. Hence, I think it is naive to believe that the current leaders in this race have no serious challengers.
An essential characteristic of information and communications technologies is that they are constantly subjected to 'technological disruptions,' which frequently introduce new players and redefine products and markets. Anyone who thinks the OS environment for mobile communications devices is not going to be subject to similar discontinuities over the next five years is probably suffering from 'technology myopia.'
Nokia: Is This A Revival? [View article]
Totally agree on your views about 5 years versus 6 months in this sector, especially for Nokia.
Also, NSN should actually continue to do well in China, since it has over 20 years of working with China Mobile and was one of the first companies to support the operator's initial GSM network. Of course, in those days GSM was dominated by Ericsson and Nokia as co-lead developers of the commercial technology.
Good to see also that NSN is signed up for deployment of TD-LTE in 3 cities in China with China Mobile. Last I saw, NSN was listed with 5 out of 11 TD-LTE network launches worldwide at this time.
This strength that has returned to NSN is one reason why I am less convinced that an IPO is in the pipe; although if it is, I should expect it to be driven more now by Siemens; although I could be wrong.
Nokia: Is This A Revival? [View article]
Thanks for the additions, all of which are very valid observations.
I agree with you about the hurdles and as we have seen with the move by the House Intelligence Committee to recommend that the Committee on Foreign Investment in the USA should block any deals by US operators involving Huawei or ZTE. This in itself is a huge topic in terms of where it goes for Sino-US trade relations, etc.
What makes it different to the same kind of xenophobic protectionism displayed by the US during the 1970s and early 80s towards Japanese electronics and car manufacturers (which simply led to a Trojan Horse invasion) is the security aspect. As you point out, this also embraces more than simply data espionage, but embraces issues about human rights, etc.
On the Chinese cloud issue, I think this is less important to the business of selling mobile phones (especially smartphones) in many emerging economies, such as India, South-East Asia (ex. S. Korea & Singapore), the ME, Africa and parts of South America. Providing the handset operates on the chosen operators OS, one is talking about price competition as the key differentiator. Being glib for a moment, one could argue that with 5 billion people living in the emerging economies (where legal niceties are taken less seriously), China has more than enough of the globe to keep it humming. After all, Europe and N.America represent about 1/7th of the world's population. In much of sub-Saharan Africa, Chinese mining and agricultural interests have exploded in the past decade with Chinese soft loan programs, so that China is now Africa's largest trading partner ahead of the US and UK. The diplomatic and business relationships enjoyed by China now make it a strong choice of partner in areas such as telecoms infrastructure over many US or European companies (despite their long history in the region), partly since the Chinese are not tainted with the whiff of neo-colonial interests or Pax Americana economic imperialism.
On the inevitable march of international labor, I agree that this is bound to play out in the decades ahead. Indeed, it is already present in places like Vietnam, Indonesia and the Philippines, as well as India. However, although part of China's workforce is celebrating the economic boom, at least 50% are still living outside cities, many with much lower wages than the average. Clearly, this is changing rapidly as China's urbanization grows, but given the numbers, I think China will be able to field a relatively cheap labor force relative to the west for a decade or so, combined with a higher standard of education than normally found in some of the lower cost countries.
Finally, I agree that NSN has an advantage in 4G LTE contracts relative to the Chinese in North America and Europe, setting aside the usual competition from Ericsson and Alcatel-Lucent for a moment. I am less sure about Russia and the ex-Soviet Union, although NSN has a track record in the region. However, going forward, I do not think the Chinese government will give 4G infrastructure contracts to Alcatel-Lucent, Ericsson and Nokia NSN ad infinitum; somewhere they will seek reciprocity. Maybe not today, but sooner rather than later. Cisco is already a likely Chinese government target for the Huawei affair. After all, telecoms infrastructure contracts have always had a high component of political input in choosing partners and is a very different business (as you know) to the handset business with its consumer facing markets.
Time will tell.