Is Nokia Turning A Corner?

Anindya is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Nokia (NYSE: NOK), once the undisputed leader of the mobile handset market, hopes that Microsoft’s (NASDAQ: MSFT) Windows 8 Phones would restore its ailing Lumia line. For the company, a significant expansion would also come from the growing tablet market. For turning itself around, Nokia has been focusing largely on its core smartphone business and planning to launch its first tablet.

Nokia's financial results have been dismal

Nokia is still the world’s second largest handset maker after Samsung, with a 22.5% global market share. However, that number includes all mobile devices -- both standard cell phones and smartphones. But in the smartphone market alone, Nokia trails in the seventh place with only a 4.3% market share.

Nokia's third quarter results have been dismal. The company posted a loss of $753.5 million, as revenue fell by nearly $9.47 billion. Its net cash and liquid assets fell to $4.68 billion. The company warned that the fourth quarter would be challenging as it begins to sell its new products. Its cash position is likely to shrink further.

Nokia betting big with its Lumia Brand

Getting consumers to give itself another chance and rebuilding its Lumia brand is an all-or-nothing bet for Nokia. It’s all about standing out from the crowd, and Nokia couldn't do that with Google’s (NASDAQ: GOOG) Android. The single most important factor would be product differentiation. Entering the Android world late, Nokia would have a hard time differentiating.

It's the new Nokia that recently rushed out an LTE-enabled Lumia 900 when AT&T (NYSE: T) demanded a phone customized for the U.S. market. Nokia's quick action with the Lumia 900 was rewarded with a flagship slot at AT&T and heavy marketing, the kind that helped Samsung dominate the smartphone world. The result was marginal success.

For AT&T it was about diversifying its portfolio with less reliance on Apple's (NASDAQ: AAPL) iPhone and finding a third alternative to the growing Android-iOS duopoly. Lumia 900's success will also determine the future of Microsoft's Windows Phone platform.

The new Lumia 920T recently sold out within two hours of its debut in China, where it is supported by heavyweight carriers such as China Mobile. The 920 model and its variants are also selling well in the Europe and the United States. For Lumia 920, Nokia invested heavily in training the sales staff at carrier and retail stores, working more with digital media, and attempting to spark more of a word-of-mouth campaign. Microsoft’s massive campaign for the Windows 8 operating system also helped Nokia in selling the 920 model.

Windows RT-based Tablet looks closer to be launched

Nokia plans to launch its Windows RT-powered tablet early this year supported by AT&T. Nokia was considering to launch this tablet in mid-2012, but decided against it until watching how Microsoft's Surface worked out. Since then, Nokia has remained tight-lipped about its possible tablet plans.

The new tablet will have a stunning look. Enveloping the device like a book, a keyboard cover will also come with the tablet. The tablet is expected to be launched with a 10.1-inch display and will have HDMI and USB ports along with a mobile connection slot.

Depending solely on Microsoft could be risky

Microsoft is playing the lead role in Nokia’s survival program. This could be risky due to the following reasons:

  1. Microsoft announced that it would introduce its own smartphone if Nokia fails.
  2. Microsoft’s Surface would be a serious competitor for Nokia’s new tablet.
  3. Microsoft is also forging partnerships with Android heavyweights Samsung and HTC.

However, Microsoft’s hardware initiative would not succeed due to its lack of expertise in the field. But I do believe that Windows 8 operating system will be a grand success going forward. The touch-screen oriented Windows 8 system is designed to run on PCs, tablets and mobile phones. Windows 8 will slowly and steadily help Microsoft regaining its lost ground against Apple and Google in the OS market, particularly when smartphones and tablets are fast replacing the PCs. Given Nokia’s proven track record in successfully manufacturing mobile devices for decades, I strongly feel that Nokia’s Lumia and the new tablet will help the company coming back on track.

Anindya7 has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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