Nokia Corp. (NOK) is currently is in a state of mess and we are yet to find any catalyst for the ensuing third quarter of 2011. The Symbian operating system is completely outdated now, facing rejection from all the corners of global markets. At present, Nokia’s future is contingent upon the success of its upcoming Windows Phone 7 software-based smartphones. Microsoft Corp. (MSFT) has developed Windows Phone operating system. However, we remain skeptical about these products as the success of any smartphone depends on several factors, including powerful operating system, strong hardware, easy application development interface, and carrier subsidy, to name a few.
Nokia is facing serious problems in the global smartphone markets. Smartphones are generally characterized by very powerful operating systems, which are capable of supporting a wide range of services and applications. Nokia performed poorly in its core mobile devices segment in the previous quarter. Nokia shipped 16.7 million smartphones, down 34% year over year and 71.8 million basic Mobile Phones, down 16% year over year. Smartphone ASP was down 2% year over year. Basic mobile phone ASP was down 3% year over year.
Nokia provided a weak financial outlook for the ensuing third quarter of 2011. The company expects an adjusted operating margin of slightly above breakeven in its core Devices & Services segment. The primary reason for the lackluster financial outlook by Nokia is the company’s poor performance in Europe and the emerging markets of China and India.
Nevertheless, “NOKIA” is still a strong brand name that can produce wonders if management can introduce appropriate products suitable for the next- generation. A strong balance sheet of over $9.5 billion of cash and investments will sustain the company’s long-term R&D activities.Meanwhile, the stock price plummeted 46% in the last year. This low-level of valuation may provide a cushion for further downslide. We, therefore, reiterate our Neutral recommendation on the stock.
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