Nokia: Making All the Right Friends
Tim is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
To say Nokia has had a rough month is a huge understatement. The company will certainly be glad to put April behind them, as will Nokia (NYSE: NOK) shareholders. Down about 35% since the end of March, even with the day’s nice pop (about 3.5% as it stands now) you’re not likely to hear much cheering from the Nokia camp.
Apple (NASDAQ: AAPL) shareholders continue to revel in a quarter that saw iPhone sales – in addition to revenues, earnings and most everything else –grow by leaps and bounds. It can’t be substantiated, but at this point it appears every man, woman, child and fetus on planet earth owns at least 3 Apple products.
Then there was the recent news from Google (NASDAQ: GOOG) that they've expanded their already impressive suite of offerings beyond search and Android OS technologies to include additional Cloud services called Google Drive. This must all feel like pouring salt in the wounds of Nokia faithful.
Some Powerful Friends
But when the going gets tough – as they are now for Nokia – it’s nice to have some stalwart friends in your corner. As it happens, Nokia has two powerhouses – AT&T (NYSE: T) and Verizon (NYSE: VZ) – that would like nothing more than the company’s new Lumia phone running Microsoft’s (NASDAQ: MSFT) Mango OS to start making a name for itself in the smartphone market.
Now, two rivals like AT&T and Verizon are certainly not pulling for Nokia simply for philanthropic reasons – they’ll save that for the PR guys. But even as the two telecommunications behemoths announced iPhone sales of 7.5 million between them last quarter, they were singing the praises of Nokia and Microsoft’s Lumia 900. Why? Because the thought of a duopoly between Apple and Google is more than a little frightening for the carriers.
The iPhone already forces AT&T and Verizon to subsidize what they feel is an unhealthy chunk of the profits, and if the duopolistic trend continues margins will be eroded even further. That’s not good, hence the love of all things Lumia.
AT&T is already on board – selling Nokia phones running Microsoft’s OS since April 8th – and should announce sales numbers for the month soon. Verizon is just about ready to ramp up their own sales of the Lumia smartphone, and with these two allies in their corner Nokia is hoping to make a serious dent in what is a hyper-competitive marketplace.
For Nokia investors AT&T and Verizon shouldn’t be viewed as the white knight swooping in to save the day – they have their own shareholders to concern themselves with. But as it happens, the success of Nokia appears to dovetail quite nicely with those shareholder concerns, and that’s something that should at least provide a ray of hope for Nokia fans. Of course the 7% yield and EURO 10 billion (about $13.2 billion U.S.) in ready cash the company boasts should warm a few hearts in the interim.
The investment opinions included are just that, opinions. Investing involves risk, as you well know, so consider your decisions wisely. Tim holds no position in the securities mentioned in this article. The Motley Fool owns shares of Microsoft. Motley Fool newsletter services recommend Microsoft, 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.