3 Reasons Why the Lumia 925 Will Succeed
Adetokunbo is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The smartphone market is showing explosive growth. It is expected that the sales of smartphones will reach 958 million units this year, up from 722.5 million units last year. Success in the sector is based both on the strength of a company’s brand and the quality of its product. Nokia (NYSE: NOK) recently introduced the Nokia Lumia 925. Can the Nokia brand compete with the others in the market? Below, I will explain why the market in emerging economies, with Nokia’s foresight to create innovative features – along with the reported growth in Lumia sales – will allow Nokia to succeed with the Lumia 925.
Over the past few years, Nokia has traded in the emerging markets to improve its competitive position in the smartphone market. However, Nokia recently had to push its products to lower price points to survive. It slashed the price of its Lumia 920 in India in March. To put pressure on Nokia, Apple (NASDAQ: AAPL) slashed the price of its oldest iPhone in emerging markets below $300. Low-end Android manufacturers have also intensified the pressure on Nokia.
However, Nokia has taken steps to solve the problem. The company has sped up the debuts of a new class of budget Lumias. The Lumia 521 is a perfect example with a full price of just $150! Consequently, the company’s rivals aren’t likely to influence its ability to expand in emerging markets, as increased low-budget Lumias should help Nokia make good sales.
Nokia has added numerous innovative features to its line of smartphones. The company announced new features such as advanced lens technology, next-generation imaging software, and a new Nokia Smart Camera to the Lumia 925 product. While introducing new features may create interest in the short term, if the company does not include a killer app, it may have trouble competing with its rivals. But since Nokia has taken its time to evaluate the situation, the company has encouraged a third party application to allow developers build apps that run fast and smooth on its smartphones.
During the first quarter earnings report, Nokia revealed that it sold 5.6 million Lumias, up from 4.4 million in the previous quarter. The company also reported that it had sold 19.9 million Lumias in total since shipping its first Windows Phone device, the Lumia 800, in November 2011.
Compared to peer BlackBerry (NASDAQ: BBRY), which reported shipments of 6 million units in the first quarter, Nokia is competitive. BlackBerry’s shares hit a 52-week low of $6.22 on September 24, more than 67% below the 52-week high it hit in January. The stock came roaring back, before a recent (again) big drop on the back of poor earnings on June 28, falling to below $11.
Along with introducing metals for the first time to the Lumia range, Nokia will introduce the Lumia 925 to Europe with Vodafone. Nokia officials believe that the product launches of Nokia’s smartphone are beginning to increase sales in the United States. In comparison, shares of BlackBerry fell by 4.5% after two brokerages expressed disappointment in its U.S. launch of the BlackBerry Z10 smartphone. Nokia has also announced that Vodafone customers will have exclusive access to a 32GB version of the Nokia 925.
Investors should pay close attention to the smartphone market as sales continue to grow at an explosive rate. Apple and Google (NASDAQ: GOOG) are the dominant forces in the smartphone market. Apple’s iOS and Google’s Android lead the smartphone operating system race. For Apple, recent movements has been disappointing, as its stock fell around 46% on April 19 from its 52-week high of $705 on September 21. Apple has an EPS of 41.90, and the stock now trades over 50% its average Wall Street target. Standpoint Research initiated a buy rating with a price target of $480.
Google has seen about 900 million Android devices activated. The ability of Android to provide a broad selection of devices for its partners continues to make it a clear leader in the market. Some analysts are eying the $1,000 per share mark for next year. It crested $881 this week, and has seen a 2% pullback from its 52-week high, so this might be an opportunity to get in.
Relying on innovations and its connection with the emerging markets, Nokia will grow sales. Its shares hit a 52-week low of $1.63 on July 18 last year. But Nokia came roaring back in the following months and reached its 52-week high $4.90 on January 23. The stock is now trading below $4. I believe it will continue its upward trajectory as Lumia sales improve. Argus upgraded it to buy in February with a $6 price target.
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Adetokunbo Abiola has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. 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!