The Final Turnaround

By Abir Karmakar - August 31, 2012 | Tickers: AAPL, MSFT, NOK | 0 Comments

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Windows Phone is gradually growing and Nokia (NYSE: NOK) is also gaining a position by following the path of Windows Phone. The problem is with Windows Phone share as its growth can’t manage to pick up the faster pace and therefore the cell phone maker is also facing several hiccups as it has bet its company success on the Windows phone operating system.

The study, conducted by Localytics, shows that just since January, the number of Windows Phone handsets has grown 312% worldwide and 273% in the U.S. Nokia’s share of the global Windows Phone market, meanwhile, has gone from 22% of the market to nearly 60% (and its U.S. share has gone from zero to 32%).

Right now the Finland based company’s shares are up nearly 90% from their low reached in July, after a series of positive news articles added optimism for the company's prospects. The company faced turmoil ever since it reported earnings on July 19 when shares fell well below $2. Since then, the cell phone maker announced the sale of Qt software, a compiler for Symbian apps, launched the Asha 311 smartphone in the UAE, and is rumored to be launching Windows Phone 8 on Verizon Communications this year. Current market sources are reporting Nokia will announce two Windows Phone 8 devices as early as September 5. Nokia broke out of its current downward moving tunnel it had been in since June. Which begs the question, should investors be shedding their money by buying for future benefits?

In the second quarter 4 million Lumia devices were sold; a sharp 200% increase from Q1. Net cash reached EUR 4.2 billion by a decreasing effect of EUR 700 million in the last Q. Gross cash was EUR 9.4 billion. Smart device sales also declined by 10% due to lower sales of Symbian. For recognizing excess component inventory there was EUR 220 million in allowances from its Smart Devices. Future allowances could be made dependent on future sales and the net impact on the recognition for its devices and services units was a 550 basis point decline. The cell phone maker through promotional activities will show the impact of Windows Phone 8 for Windows Phone 7 sales. The company will also differentiate itself from other makers by redefining mapping and location-based NAVTEQ services.

Now, let’s come to Apple (NASDAQ: AAPL) whose market value surpassed the record set by Microsoft (NASDAQ: MSFT). Up to now, Apple’s shares have gained 64 percent, endowing it with market capitalization of $623.5 billion, which is more that the Windows maker’s 1999 value of $620.8 billion at time of technology boom creating a world history. The tablet king also earned more than $1 billion on Aug. 24,  because Samsung has infringed on six of seven patents for mobile devices. Samsung's patent loss against Apple will change the cost of Android for other manufacturers. This paves the way for long waiting Nokia again to acquire a better position in this rat race.

Successive Nokia Lumia launches will be accompanied with better support at the retail sales level and Lumia 610 and 900 devices has already increased their sales record in China and Latin America. To sustain Nokia’s global market share the Asha feature phone product will contribute a lot. Windows phone 8 will be supported with updates from the Windows maker at least for 18 months. Again, Nokia is cutting a lot of expenses for their future. These make several reasons for the investors to invest.

Nokia is a very speculative company to invest and its shares are sold off sharply after the company acquired market position. Although the current quarter of the company is not up to the mark but investors with a long term thought may invest as because there is a golden line of hope in the coming future. Nokia, the world's second-largest cell phone maker is already doing R&D to assure its investors a remarkable return. So let us see what Nokia can do in the coming quarter.

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