Can Nokia Defeat Apple in the Smartphone Wars?

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

The digital camera is no longer a necessity on a trip out with family and friends unless you are a professional photographer. More so, the fact that you cannot upload pictures to social media sites from most digital cameras is not helping the cause of the digital camera. Of course, the best camera is the one in your hand right now, probably the one on your smartphone. This is probably why Nokia (NYSE: NOK) has packed its latest phone, the Lumia 1020 with a 41-megapixel camera. In this piece, I will discuss what Nokia intends to achieve with that many megapixels and if the move will be profitable.

A couple of weeks back, Nokia released its second quarter results, which though not impressive showed the Finnish giant on a pathway to recovery. Nokia reported an operating loss of €115 million (£98.8 million) plus a 24% drop in revenue down to €5.7 billion. In addition, the handset business was down 32% from last year and 6% in the last quarter. However, the Lumia line has shown signs of progress with Nokia reporting the sale of 7.4 million Lumia phones over the 5.6 million that were sold in the last quarter.

Interestingly, we can observe that the percentage of smartphone sales at Nokia is significantly lower (at 40%) than the percentage of smartphone sales at rivals such as Apple (NASDAQ: AAPL). However, it may be worthy to note that Nokia has finally shipped the last batch of its Symbian phones and will now be able to focus on increasing market share for the Lumia line. Hence, the initial reduction in overall handset sales may be because the company has stopped selling Symbian phones after it shipped the last 6 million Symbian phones in the last quarter.

Moreover, while it is true that Nokia sells a smaller number of smartphones in comparison to Apple, it is probable that Nokia has a more sustainable plan for growth in the long term. For one, Nokia sells low-cost smartphones, making it very easy for the company to get a grip in the Asian and African markets. It is not presumptuous to opine that the U.S market does not resent a great phone at a nice price. However, the $300 price with a two-year contract for its Lumia 1020 seems to be a pretty daring move considering the fact that its last $100 phone did not do well in the market.

Thus, the fact remains that Apple is selling more phones than Nokia right now, and it is possible that Apple retains the lead for long. Interestingly, it would seem that Apple is already aware of the strength of Nokia and its "great phone, low price" strategy. In fact, Apple has been linked with a low-cost iPhone called the "iPhone 5C, which may be price around $99 or less with carrier subsidies. The speculated iPhone 5C has all the features of the iPhone 5 and the upcoming iPhone5S except that some components are housed in a cheaper polycarbonate shell. Yet, I'd rather have a $99 iPhone 5C than a $300 Lumia 1020.

On the competitor side, BlackBerry (NASDAQ: BBRY) has lost a significant market share to Nokia according to the latest IDC report on global smartphone market share for first quarter. The report places the Windows operating system in the third position after the iOS and Android. For instance, in the first quarter, BlackBerry sold 6.3 million units to hold a 2.9% market share, down from the 6.4% market share that it held last year. Apple also lost significant market share to hold a 17.3% market share down from the 23.0% that it held last year.

Google (NASDAQ: GOOG) remains top gun with is Android operating system gaining a 75% market share, up from the 59.1% market share that it had a year ago, and it seems that nothing can ever go wrong with Samsung. More so, Google is set to release another phone through its Motorola arms soon. The phone, called the Moto X, promises to take voice controls on smartphones to another level in a way that downgrades the Siri voice assistant on the iPhone.

The bottom line is that Nokia has a great outlook on paper but the reality is quite different. For instance, Nokia's ego on the Lumia 1020 is already being deflated because the phone was ranked as the 13th most popular AT&T phone on Amazon two days after its release and it stood at the not-so-regal position of the 25th most popular AT&T phone on Amazon three days later. More so, Nokia is still a long way from going heads on with Apple or Google and the former may need to be content with staying in third place. Nokia will be a good stock to own if you don’t really fancy making profits, but I'd rather have another stock in my portfolio than Nokia right now.

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Victor Alagbe has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. 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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