Can Nokia Succeed Where Others Failed?

| About: Nokia Corporation (NOK)
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Nokia (NYSE:NOK) is starting to rival Samsung (OTC:SSNLF) in rapidly releasing new smartphones for the global market. The company announced and released a 4.7 inches Nokia 625 in a month's time and is all set to introduce a larger phablet next month. The company's low end 520 has been a big success and the initial indications about the Lumia 1020 are also very encouraging. Nokia has launched almost 15 Lumias in the past one and half years and has managed to grow shipments sharply. The company has almost totally captured the Windows 8 mobile OS accounting for 85% of all the WP 8 smartphones shipped. Nokia still faces some issues regarding profitability and competition, but the company's Lumia performance has been excellent in the past couple of quarters. Nokia is now all set to fill a big gap in its portfolio by launching a Windows tablet running on a Qualcomm (NASDAQ:QCOM) processor. While most analysts have dismissed this as futile even before the launch, I think that this is a good move on Nokia's part. The company remains cheap given its valuable technology assets and improved strategy execution.

What does the new Nokia Tablet look like

The specifications for the new Nokia tablet look extremely good though pricing is not known. The company will use the best ARM (NASDAQ:ARMH) processors in the market now - Qualcomm's Snapdragon 800 processors with 2 GB of RAM and a 10.1 screen size. It will have a 32 GB storage and a HD display. This makes the product quite competitive with the best Android and Apple tablets in the market today. The pricing will be the key for this product as well as the software that ships with this product. Current indications are the pricing will be same as that of the iPad, which places it in the premium category. Given the hardware specifications, the pricing will certainly not be too cheap. However, Nokia's current Lumia products are quite competitive in pricing and I think Nokia will not make the same mistake as Microsoft did in keeping the Surface products too high. New launches in a competitive market will have to be priced prudently to increase the penetration.

We're told that Nokia's tablet will be thinner than the current iPad, and lighter at just over a pound in weight. The body of the device will be colored, and Nokia plans to include a 6-megapixel camera at the rear with a 2-megapixel shooter at the front. The 10.1-inch display that Nokia is planning to use will run at 1920 x 1080 resolution, and has been improved for outdoor readability thanks to a high amount of bright output. Sources have also revealed that the tablet will feature Qualcomm's quad-core Snapdragon 800 processor alongside 2GB of RAM. We understand Nokia is aiming for 10 hours of solid battery life with LTE connectivity. Other features include a microSD port to extend the 32GB of storage, a Micro HDMI connector, and a Micro USB port.

Source - Verge

Windows RT Performance has been a Disaster till now

Microsoft (NASDAQ:MSFT) has been desperate to win a greater share of the mobile devices market as the computing industry migrates to smaller form factors. The PC market is starting to decline at a greater pace leading to huge problems for MSFT, which gets the majority of its revenues by selling OS and Office software to the PC market where it has a monopoly. MSFT launched Surface tablets last year to increase its penetration into this fast growing category. The company launched two variants - Surface Pro and Surface RT. The Surface Pro tablet ran on Intel (NASDAQ:INTC) processors and worked on MSFT's traditional OS. The Surface RT on the other hand ran on ARM designed processors and ran a variant of Windows, which had some features missing. These products proved to be a massive failure as the pricing was too high and the performance was not as good. The Surface RT was a big disaster as it did not have MSFT's killer applications such as Outlook. Nvidia (NASDAQ:NVDA) CEO said that the lack of Outlook was one of the main reasons for the failure of the Tegra 3 powered tablets. The company had to write down $900 million because of this failure. This was not a huge surprise given that MSFT's forays into the hardware market have been mostly unsuccessful. Major PC OEM's such as Samsung, Lenovo and now Asustek have also abandoned the Windows RT products. They don't see a bright future and would rather go with Intel-powered Windows products. Though MSFT seems to be prepping up a second-generation Surface RT tablet, the prospects do not seem too bright given MSFT's past track record.

Why is then Nokia entering Windows RT

It has become critical for a major smartphone/handset producer to have a tablet line. The line between large phablets and tablets is getting blurred with large phablets having a screen size approaching that of 7-inch tablets. Nokia is not a niche player targeting one category like BlackBerry (BBRY) or Apple (NASDAQ:AAPL). The company plays in all price segments like Samsung. It is extremely important for Nokia to have a tablet product and I have emphasized that point for a long time now. Nokia has tied up its fortunes to MSFT by entering into an agreement to sell its smartphones using Windows OS only. The company has made this strategy a success despite Windows limitations. This has given the management the confidence to enter into the tablet segment using a Windows OS. The wholesale abandoning of Windows RT by major companies also leaves an open field for Nokia. Currently Intel does not have a good, low priced, low powered processor for tablets. So Windows RT is the only decent option for Nokia. The company is also much better at hardware than MSFT and has a reasonable chance of success. Even if it fails, the company does not stand to lose much. It will gain valuable experience in tablets and be able to launch Windows tablets using Intel's new Baytrail processors. If Nokia succeeds, then it will make MSFT even more dependent on Nokia.


The competition in the tablet market is quite fierce with Apple , Amazon (NASDAQ:AMZN), and Google's (NASDAQ:GOOG) Android army. It will not be easy for Nokia to break into the market as it already has powerful players well entrenched. Tablet pricing has also decreased as PC OEMs have drastically cut prices to increase their market share. However Nokia is used to competition, given that the smartphone market is even more competitive than the tablet market. Nokia also has a well established distribution and marketing network along with an established supply chain. The company is known as a solid and reliable maker of top-quality hardware, which will help it against competition from the likes of Acer, Lenovo and white brand tablet vendors.

Stock Performance and Valuation

Nokia's stock has been consolidating in the last month at the $4 level after reporting some positive news. The launch of the new Lumia 625 and Lumia 925 should help keep up the momentum of the Lumia sales. At 0.4x sales and 1.5 times book value, the company is quite inexpensive when compared to other technology companies. The company has some excellent and unique assets, which makes the $15.6 billion market value look cheap in my view.


I think that Nokia launching a tablet is a great move by the company. The management has impressed me in the last few quarters by introducing some great new products. The company has also got success in increasing its smartphone market share and is consolidating its operations. The new tablet will fill a crucial gap in its product portfolio and make Nokia a more sustainable mobile player. I think that the company has little to lose from launching a Windows RT tablet and a lot to gain. The company's smartphone portfolio is also quite robust with a great mix of value (Lumia 520) and innovative (Lumia 1020) products. It is the right time for Nokia to expand its TAM by getting into the tablet market. I remain positive on Nokia stock, given that the valuation is cheap and the company has sharply accelerated product launches.

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