Nokia Shares Rally Amid Fierce Smartphone Wars
Muhammad is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Reports indicating that Nokia (NYSE: NOK) shares were rallying by the end of the outgoing week have stirred some excitement among shareholders. This is mainly due to the fact that the consumer electronic market had been performing poorly but Nokia seemed to have somehow weathered the storm and emerged more profitable. Nokia’s share price went up by close to 10% over the last couple of weeks; a trend that I believe is likely to continue with good reason.
The first reason attributable to the rise in Nokia’s share price is that reliable sources have revealed that this Finnish phone maker plans to enter into a contract with one of United States’ communication giants. It is reported that Verizon Communications will start backing up Nokia’s new phone models with their release this coming month.
This means that Nokia could see the amount of sales easily double in the United States all thanks to Verizon. Perhaps this is what has given many investors the hope that Nokia is on the path to success and has been the cause of the large volume of shares traded this past week. Verizon has iterated that it has been searching for a way to offer its customers a wider selection of phones and that partnering with Nokia has given it the best opportunity of doing so. When the news of the new Nokia phones hits the streets, Verizon will no longer have to worry about having a limited handset selection for its customers. More Nokia fans may end up joining Verizon since it previously did not sell any of Nokia’s windows smart phones.
Joint ventures that further strengthen Nokia’s position
It recently came to light that Nokia would be partnering up with Microsoft (NASDAQ: MSFT) for a new smartphone. The event which is expected to reveal the new smartphone has been strategically scheduled for September 5th just a few days ahead of the iPhone 5 release from Apple (NASDAQ: AAPL). I believe that this bold move means that this smartphone will be the iPhone’s challenger in the smartphone war which will be closely followed by the world.
It is rumored that this smartphone from Nokia and Microsoft will run on the Windows 8 platform, which has further fueled anticipation from both sides’ supporters. Apple will, without a doubt, have to bring its A game to the table since this war looks like it may go either way. In terms of hardware and software, Nokia has proven itself as quite capable with the release of the Lumia and Pureview, hence strengthening my belief in its ability to take on other smartphone giants such as Samsung.
Presently AT&T (NYSE: T) is the only company that sells the Lumia 900, which is quite an interesting fact in itself. This basically means that as soon as Verizon (NYSE: VZ) start stocking up on Nokia smartphones, Nokia will be in fact backed up by two of the largest mobile couriers in the United States. AT&T which will be the main carrier of the new Nokia smart phones is also bound to benefit from an increase in subscription numbers. It is also expected to remain the lead rollout partner for the Nokia handsets. Despite the fact that its market share was taking a dive, a recovery is well in sight with chances of exceeding its previous numbers.
Nokia’s road to recovery
Nokia has faced stiff competition from other handset makers such as Samsung and Google in the past year. From Samsung’s Galaxy series to Google’s smartphones, all of which run on Android, it seemed that Nokia was playing catch up with these two. Ericsson also came onto the stage with the launch of the Sony Ericsson Xperia series that also seemed to draw quite a loyal following. Recent speculations also revealed that Ericsson was in talks with Nokia Siemens Networks (NSN) in a bid to acquire the latter’s business support systems unit (BSS). This move will help further Ericsson’s agenda of expanding into the BSS business while at the same time help Nokia Siemens Networks deal with their financial problems.
Critics who had been spelling doom for Nokia have been shocked to say the least as it has made a surprising come back which may see it topple the big corporations. The fact of the matter is that Nokia stands to be the leader in the smartphone niche if all the other competitors continue engaging in patent wars and other forms of battles that tend to slow or completely halt production. In fact, since Nokia is the world’s largest mobile phone company enjoying a 28% market share globally, it stands to reason that it should also be the top smartphone company.
With the restructuring going on in Nokia I remain highly optimistic and positive about what the new changes will bring. The decision to move one of its headquarters from Austria to Hungary has been sighted as an important move in the restructuring process and will be helpful in increasing efficiency.
The chart above tells the story of how Nokia fell but is now getting back on its feet. With all the news of joint ventures, release of new smartphones and restructuring in the air, I believe that this is the best time to get your hands on Nokia’s shares. In my opinion this qualifies as a strong buy.
muhammadbazil owns shares of Google. The Motley Fool owns shares of Apple and Microsoft. Motley Fool newsletter services recommend Apple and Nokia. 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.If you have questions about this post or the Fool’s blog network, click here for information.