After a rocky couple of years, Nokia Corp. (NYSE ADR: NOK) has a plan for a comeback, and it starts with the release of the new Lumia 900 smartphone.
The Lumia 900, which went on sale in the United States yesterday (Sunday), is the fruition of last year's deal with Microsoft Corp. (NASDAQ: MSFT) to put the Windows Phone operating system on Nokia smartphones.
While not the first Windows-powered Nokia phone (that was the lower-cost Lumia 710 in January), the Lumia 900 is the first to be favorably compared to Apple Inc.'s (NASDAQ: AAPL) iPhone and the better phones running Google Inc.'s (NASDAQ: GOOG) Android.
"This launch will set the tone for Nokia's recovery," Alex Spektor, an analyst at Strategy Analytics, told Bloomberg News. "The U.S., since the rise of the iPhone, has become the most important market for mobile devices so success here is important for any vendor who wants to succeed on a global scale."
And Nokia badly needs the Lumia to succeed.
Granted, the situation has been grim.
According to research firm IDC, Nokia's global market share of handsets slumped to 26.6% in the fourth quarter of 2011 from 40% in the fourth quarter of 2007.
Revenue and earnings have followed the downward trajectory. Nokia's earnings in the December quarter fell 76% year over year.
Investors have responded to the negative news by dropping NOK from a high of about $40 in late 2007 to the $5 range.
But if the Lumia 900 can revive Nokia's fortunes – and there's good reason to think it will – the beaten-down stock could be a great investing opportunity.
The Potential of the Lumia 900 Smartphone
The Lumia 900 has already earned several accolades. It won Best in Show at the Consumer Electronic Show earlier this year and has earned favorable reviews from such influential critics as David Pogue of The New York Times.
The Lumia 900 even has a few advantages over the iPhone, such as a lower price ($99) and 4G network connectivity. Such features also help make it an attractive alternative to Android phones.
Furthermore, Nokia and Microsoft's partnership should be able to capitalize on fragmentation in the Android world. The almost endless combinations of devices and Android system versions have created compatibility issues that have frustrated both app developers and customers.
And the Lumia 900 will get a massive marketing push from three well-heeled companies: Nokia, Microsoft, and AT&T Inc. (NYSE: T), the phone's carrier.
"Before you walk in to the store, you know this is our hero phone," AT&T device head Jeff Bradley told CNET.
The high profile of the Lumia in AT&T stores should jolt sales, as many customers walk into a carrier's retail outlet unsure of what to buy. Strong recommendations from AT&T's sales people – who each were given a Lumia – could go a long way.
Windows Phone does have one major disadvantage in its relatively immature app and accessories ecosystem, but Microsoft and Nokia have jointly pledged to spend $24 million to get the platform caught up.
"We're playing to win," Hans-Peter Brøndmo, Nokia's head of concepting and innovation, said at VentureBeat's mobile summit on Tuesday. "This is a global market and a global stage. We have a good mix of cultural perspectives and an incredible opportunity to come back."
Nokia's (NOK) Opportunity
Analysts say Nokia will be the biggest winner among handset makers should Windows 8 get the traction they expect.
In a January report, IHS iSuppli forecast that Windows Phone would grow its global market share of smartphones from less than 2% in 2011 to 16.7% in 2015. And iSuppli sees Nokia netting more than 50% of those Windows phone sales.
Credit Suisse Group AG's Kulbinder Garcha recently said he thinks Nokia could ship30 million to 100 millionWindows phones in 2012 and 2013 across a wide price spectrum.
Garcha sees Nokia finding success in many markets around the world, with other Lumia models already on sale in 31 countries on more than 50 carriers.
In Europe, where Nokia has a much stronger brand, carriers already have been pushing Lumia phones. The Lumia line also has strong potential in emerging markets like China, where Nokia still sells a lot of low-cost feature phones.
And there are a few wild cards, like the company's 41-megapixel camera technology. Five years in the making, the massive surplus of pixels gives a phone camera the ability to zoom. It debuted recently in the 808 Pureview, a phone using Nokia's old Symbian operating system, but could be added as a "killer" feature on a future Lumia model.
Nokia obviously faces serious challenges, but with the Windows-powered Lumia line it has come up with the best possible plan to bounce back. And at $5, NOK doesn't have much downside left.
"[The Lumia 900 is] competitive with the best alternatives offered by the Android camp," said Wayne Lam, senior analyst for wireless communications at iSuppli. "[It] represents Nokia's first step to reclaim its market share."
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