For Nokia, Not Enough News is Bad News
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What were Nokia (NYSE: NOK) executives thinking on Wednesday when they announced the company's new generation line of smartphones powered by Microsoft’s Windows Phone 8 operating system? They definitely weren't thinking about investors, or they would have answered three of the most important questions - when would the phone be available, exactly where it would be available, and for how much.
You’d think this information would have been at the forefront of Wednesday’s presentation considering investors are anxious for anything that could increase the value of the long-suffering stock. The details provided about the specs for the devices were great, but providing the basic information I note above that directly affect how much the company stands to earn is equally important.
Nokia faces heavy competition from other handset makers who are unveiling, or who plan to unveil, new devices this month. These include Apple (NASDAQ: AAPL), Motorola and Research In Motion (NASDAQ: BBRY).
First and foremost is Apple, which finally pointed to Sept. 12 as the date it will unveil the long-awaited iPhone 5. Motorola, also on Wednesday, unveiled three smartphones. These are the first from it since it was acquired by Google this year. Samsung beat Nokia to the punch last week by announcing that it was using Windows 8 on some of its devices. More Blackberries from RIM are slated to hit the market, but their rollout may not be for another six months as it deals with issues surrounding its operating system. Motorola has suffered the same demise as Nokia in competing with Apple and Samsung devices that are powered by Google's (NASDAQ: GOOG) Android operating system.
In presenting its new phones, which include the Lumia 920 and Lumia 820, Nokia’s CEO Stephen Elop hailed them as creating the most personal smartphone experience. As he spoke, and throughout the trading day, the stock slid, eventually closing at $2.38 a share, which was almost a 16% drop for the day. By the closing bell on Wednesday, roughly 220 million shares had been traded, up from the 50 million that are traded on average.
I see this as reflecting the ongoing sentiment investors have about Nokia’s ability to survive, yet alone compete in the mobile space. Nokia developed a strong reputation for being a top manufacturer of handset devices, which propelled it to holding the number one spot in terms of sales up until this year. Samsung knocked it from its perch on this pedestal earlier this year, selling 86.6 million units during the first quarter. Nokia sold about 83 million.
As smartphones have grown in popularity, thanks to Apple’s iOS and Google’s Android operating system, Nokia has been pushed further down the totem pole of consumer choice. However, one thing the company has shown in the past is its ability to make quality products. That’s why I took an optimistic approach to it and the new Lumia devices. One of the best choices Nokia made was partnering with Microsoft to power the phones with Windows 8. I thought this could position it well in offering products that would be nice alternatives for those who do not want an iPhone or an Android-powered phone.
By not coming out with where to buy, or how much it will cost for consumers to own this phone, Nokia left too much to the imagination. It reminds me of the flop of the much-hyped Lumia 900 that came out earlier this year. Remember it debuted on Easter Sunday, a day in which many of the AT&T stores were closed! The hype was created by Nokia and AT&T, which sells the phone. Interesting, now that phone seems to have gone by the wayside for AT&T as Samsung’s Galaxy SIII is being marketed far more heavily.
If Nokia plans to resurrect its stock from the doldrums, it has its work cut out for it. Many of the company’s fundamentals reflect its challenges. For example, revenue growth is a negative 29.98%. The last time it was positive was in June of last year when it was 2.7%.
Its market cap has plummeted to roughly $9 billion from $21 billion, where it stood in September of last year, according to ycharts. Since 2009, Nokia’s gross, net and operating profit margins have deteriorated. At the end of 2009, the gross profit margin was 32.36%. By the end of 2011, it was 29.28%. For that same period, the net profit margin declined to -3.01% from 2.17%; the net operating profit decreased to -2.78% from 2.92%.
I don’t see any meaningful improvements in Nokia’s fundamentals in the short-term. In the long-term, these fundamentals may improve. Investors are yearning for any sign that the company is committed to improving its earnings, which is why (I say again) they weren’t too pleased with the lack of info about pricing for the new Lumias from Nokia on Wednesday.
So, to say there is a lot riding on the success of this flagship line of Lumia devices is an understatement. Hopefully, more details about the devices’ pricing will come soon, and definitely before interest will wane considerably, because the new iPhone has finally been unveiled.
TwillyD has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services recommend Apple, Google, 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.
