Nokia's Revolutionary Lumia 1020 Showcases Its Prowess In Manufacturing And R&D

| About: Nokia Corporation (NOK)

A couple of months back, I wrote an article for Seeking Alpha featuring Nokia's (NYSE:NOK) wonderful Asha 501. After sharing various technical and other details, here is how I explained why I truly appreciated this product:

Simply put, because to me it clearly shows Nokia's recognition that there is a very large world outside of those fortunate enough to be able to afford any of the latest "killer" products that they so choose. The person, for example, that upgrades to the iPhone 5 for no other reason, and with no other goal, than to be the envy of their friends.

No, this business of communication is very beneficial to a much bigger world than that. What struck me most about the Asha 501 as I watched and read through a ton of information in preparation for this article - in fact, that really inspired this article - was the sense that "I could be happy owning one of these." I am so happy to think of all the individuals who may actually have that opportunity at a very reasonable price.

And Now . . . For Something Completely Different

Last Thursday, July 11, in New York City, Nokia released a very different device, the Lumia 1020. This is the other end of the spectrum; a flagship device, designed to feature the very best technology Nokia knows how to produce. And, as it turns out, Nokia's very best may well turn out to be revolutionary.

If we look back a year from now at Nokia's progress in their fight for market share against Apple (NASDAQ:AAPL) and Samsung (OTC:SSNLF), the Lumia 1020 may prove to be the defining moment where the company's fortunes began to turn. A nice overview of the 1020's technology and capabilities can be found on Nokia's website.

A Stunning Technological Review

But just how impressive is this device? The Register, a UK-based online tech publication, just took a detailed look at what Nokia accomplished with the Lumia 1020. In the introduction to their article, they describe Nokia's engineers as having "produc[ed] something with the capacity to startle."

You can read the entire article for yourself if you wish to and have the time. For those interested in the "Cliff Notes" version, I'll do my best here:

  • The device breaks barriers for miniature cameras, and represents a convergence of several technologies that very few companies could hope to replicate.
  • As opposed to making compromises with respect to size and form factor to accommodate the technology, Nokia raised the bar for both themselves and their partners by basically "asking for the moon." This was the case with respect to the array of lenses, optical image stabilization, as well as the audio recording capabilities.
  • As opposed to a simple "repackaging" of Nokia's older PureView 808 device merely to incorporate the Windows Phone operating system, Nokia's ambitious goals for this phone required that literally every part be completely new.

What was The Register's takeaway?

There's a kind of insanity in trying to overcome such engineering challenges, when bending or removing the constraint would have been so much easier. Make the unit bigger. Make it less sensitive. The punter won't mind.

They go on to observe that such genuine innovation is only possible for a company which employs world-class engineers and has also invested serious money over an extended period of time in research and development. They conclude by stating their belief that these breakthroughs will not be easily or quickly copied.

A Real-World Application

Now that I have shared the technicals, permit me to share an example of a potential buyer who just got very excited about the phone. That buyer is me! Allow me to explain.

As a hobby, my wife and I enjoy singing. We have taken vocal lessons for some five years now and enjoy performing from time to time in various local venues. As you might well imagine, the ability to record such performances is desirable. However, finding a way to get a quality recording, both from the standpoint of the video itself as well as the associated audio, is not the easiest thing to do. One can buy an expensive camera, and then a stereo microphone attachment. Or one can record the video using a decent camera with video capabilities or even a quality smartphone or iPad, capture the audio separately on a stereo recorder designed expressly for that purpose, and then mix the video and audio later via software. But, as I am sure you quickly grasp, these alternatives take either:

  1. A lot of money
  2. A great deal of time and effort

Enter the Lumia 1020. In addition to its stunning capabilities with respect to video, take a look at this document with respect to Nokia's Rich Recording technology. Again, for those who do not wish to review a lengthy document, I will quickly summarize.

  • Microphones are located at opposite ends of the device, giving the greatest possible stereo separation when the phone is held in landscape position.
  • The dynamic range that can be recorded is 107dB (from 33dB to 140dB). That range covers everything from a whisper to a jet at takeoff.
  • Basically, Nokia does this via two preamps. One handles the signal as-is. The other attenuates it by 20dB. Via software, only sounds louder than 120dB (like a sudden bass drum hit) are processed using the attenuated signal, all others use the "normal" signal. In this fashion, virtually all sounds are recorded unmodified, or "clean." Only the exceptions are specially processed to eliminate distortion. The result is essentially indistinguishable to the human ear.

What does this all mean? Simply put, in a package that fits in your pocket, this device offers both video and audio recording capabilities that rival much more expensive, dedicated equipment.

Now, ask yourself, what is the potential market for this? How many teenagers are in bands? How many parents have kids in glee club, or taking piano (or other) lessons and would love to record their recitals or performances? How many adults have a hobby like my wife and mine, or some variant of it? Perhaps you can think of other applications. My goal here is simply to get you thinking about the possibilities.

Summary and Conclusion

As noted by The Register, Nokia has produced something with the "capacity to startle." They observe that this should give Nokia "an imaging lead over Samsung and Apple that it is likely to maintain for some time."

One might initially think of simply the avid photography buff as a potential candidate for this phone. As I demonstrate above, when you really pause to think about the total package that this phone offers, you may come to a different conclusion.

In summary, two months ago, Nokia released a stunning product for the lower-end market via the Asha 501. With the Lumia 1020, they have released what would have to be described as a truly transformative product for the high-end market.

Nokia still faces plenty of headwinds, to be sure. Even though many feel that Apple has fallen short of late with respect to genuine innovation, I don't take the company lightly. Between their massive cash hoard and engineering and design talent, they are a force to be reckoned with. Google's Android operating system is still number one in market share. Critics still point to the shortcomings of Microsoft's Windows Phone 8 operating system, to which Nokia has hitched their fortunes at the present time, for better or worse.

However, at least to this point in time, that is pretty much all you hear with respect to Nokia; the company's supposed weaknesses and why their chances for success are low. But slowly, the tide may be turning. Note this closing comment from The Register:

You can forgive Nokia crowing a little about the imaging technology here, which is the culmination of trying to produce engineering answers to completely unreasonable marketing requirements. Comparing notes after technical sessions, I would say it's some years since journalists came away from a launch quite so impressed.

I do not believe the market has yet given Nokia credit for what they are accomplishing. And that, in my view, makes Nokia a candidate for outsize gains.

Disclosure: I am long NOK, AAPL. 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.

Additional disclosure: I am not a registered investment advisor or broker/dealer. Readers are advised that the material contained herein should be used solely for informational purposes. Investing involves risk, including the loss of principal. Readers are solely responsible for their own investment decisions.

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