Nokia Will Rise on Microsoft, AT&T Partnerships
Maxwell is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
When I studied abroad for a year, I discovered an interesting phenomenon: The insulting imitation. Once noticed, I could point to almost everything as evidence for it. Here’s how it works:
In some parts of Europe – I was asked not to mention specific names – people will insult Americans for behaving, speaking, thinking, etc, in a certain way. Don’t get me wrong, I love my country. But we do some pretty dumb things sometimes and it is right that we laugh at ourselves and take the good natured humor from others. But these same Europeans who insult Americans for ‘whatehaveyou’ will almost without fail participate in the same behavior. Our music, our fashion (or lack thereof), the list goes on.
So, it is with no real worry that I have read a few articles that claim our technology ‘won’t catch on’ in the European market. One such article claimed that Europe simply wasn’t interested in Nokia’s (NYSE: NOK) new Lumia phones.
For those wondering or worrying: Cease! I believe Nokia and its partners like AT&T will win the day and provide a good return for investors.
What Is Happening
It is now common knowledge that smartphones are outselling PC’s. With everyone growing more accustomed to being able to access the web wherever, whenever, they are hungry for a device that can keep up with them. Big name phone handset companies such as Nokia and Research in Motion (NASDAQ: BBRY) are working hard to roll out desirable products in both a time and cost effective manner. It can be argued that the new Nokia Lumia 900 phone is evidence of success.
In the U.S., the Lumia 900 series is carried by AT&T (NYSE: T) and doing remarkably well. So well, in fact, that the phone was at the top of Amazon's mobile-phone best seller list last week. AT&T even ran out of available stock at some of its outlets and its online store.
So, it is with patient disregard that I see lagging numbers in Europe. In both France and UK, Apple’s (NASDAQ: AAPL) iPhone and Google's (NASDAQ: GOOG) Android are dominating the market. It seems like a vicious cycle – lack of awareness leads to strength of the competition. This leads to few being sold, less spent in advertising, less space and focus given in stores, which in turn leads to people not knowing about it or what it can do.
The appeal of the iPhone and Android is not only because they are quality phones. Nokia faces a huge challenge not just promoting its new phones but changing public perception. This, in my opinion, is where Nokia is really playing it smart.
Its new ad campaign focuses on several things that hold public opinion such as all phones must look alike. One ad in particular jokes that one man is happy his phone looks like everyone else’s until a geeky girl shows that her phone is ‘just like his’. Another ad focuses on how the new Lumia gains the attraction of the opposite sex. However things are spun, Nokia knows its mission and is attacking it full force. The change in public opinion might be slow, but it will come.
Moving On…
One also must give credit to Nokia for its rebound from last month’s Pureview Fiasco. The company announced that its new 808 Pureview would be a “game-changer”. It was actually anything but. The new smartphone had a nice 41-megapixel digital camera and little else to offer. Not only that, the phone used the Symbian operating system, which was already being phased out. Nokia was already working on other products with the Windows Phone platform. The Pureview had some good hardware, but was ill-planned and met with an unsurprising fate.
Contrast that with RIM’s slow turn around. A previous article discussed how it’s update of the PlayBook was ‘too little too late’. What is more surprising is the time it has taken for the company to offer something for the public to be pleased with. The media will hold on to the last story until you give them another one, as both companies have found out – bad for RIM, but good for Nokia.
Where Things are Going
Nokia currently has a global device market share of 23%, producing mobile devices for almost every major market segment, and a brand valued at $25 billion. Even so, it has ceded significant market share to Apple and Google smartphones. One wonders if the legal struggle between Nokia and Apple over which format of next generation mobile SIM card should become the industry standard was a misuse of time, energy, and resources which could have been better spent making the European market more aware of what it can offer.
In part, I blame AT&T. Its pull back from original marketing agreements was bound to have an impact on consumer awareness. That being said, Nokia must continue its strategy of trying to convert the devoted iPhone customer base to a Window’s phone.
What is also needed is AT&T’s better preparation of its sales force. It’s longstanding relationship with the iPhone has store associates more comfortable recommending it than the Lumia. They know more about it and can discuss its features. But if Nokia hopes to take over the number one spot of ‘the most popular phone’, it will need an educated army singing its praises.
Finally, Nokia has sold more smartphones powered by Windows than any other company, accounting for almost 33%, of the 2.7M Windows Phone devices sold worldwide. Continuing its relationship with Microsoft will create tremendous competition for Apple.
Summary
Nokia became the leading handset maker in 1998 and has firmly over 30% of the market share for the past decade. I believe with its current partnership with Microsoft and growing support from AT&T (if not in ad money than in educating its staff), investors will see some positive stock performance.
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