Can Nokia (NOK) Still Have A Large Market Impact?

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12:32:00 pm on October 29, 2013

It is only a few months ago that some critics were labeling mobile phone giant Nokia as ‘finished’. In truth, Nokia had fallen well behind rivals Apple and Microsoft in the smartphone market and, until September, its future did look relatively bleak.

The Impact of the Microsoft Takeover

Early September saw the announcement that Microsoft would buy the handset device segment of Nokia. Immediately, the share price of Nokia rose from $4 to $5. Since then, the naysayers have jumped ship and the good news has continued to flow. Many bailed out as stock rose to $5 but now, with stock at $7 and still rising, this looks as though it could be the re-invigoration of Nokia.

The future for Nokia now looks very different and it is hard to imagine a world where anyone would vote against the deal. Yes, there are many uncertainties about the share price and the company will undoubtedly have to change as it loses its handset department. However, going from being very cash poor to being very cash rich is not going to be one of these concerns.

Nokia’s Previous Struggles

Nokia’s CEO has spent his three years in the job warning about the issues that he inherited when he took over the position. Such issues meant that Nokia missed out on three generations or ‘cycles’ of handsets and, as a result, their market share tumbled to a mere 3%.

Nokia, a company famed for the affordability and reliability of their devices, had lost their market share to Apple who were instead providing the opposite business plan.  Instead of adapting, Nokia stuck to their business plan, ditching smartphones in favor of cheaper and more reliable handsets, leaving the gadgets and glamour to Apple.

The problem, however, wasn’t limited to just Nokia, with Motorola (bought by Google) and Blackberry (dwindling sales) forced to the periphery of the market as well.  If you don’t continue to innovate, you die.  Ironically, Microsoft the savior, has long been a follower rather than an innovator.  It’s just that their massive pile of cash has allowed them to make many mistakes, missing big trends, and then as Microsoft does best, throw a bunch of cash in trying to catch up later.

Looking to the Future: The Positives

In the immediate future, new phones and a net tablet are expected to be unveiled. It looks as though Nokia is alive and kicking, even if it isn’t a market leader. Financially, Nokia will also go from being very cash poor to very cash rich and it will also have full control of the Nokia Siemens network at a time when the world is rebuilding its wireless networks. Although there is an incredibly long way to go, it looks as though Nokia is definitely on the right track.

The State of the American Economy: Can Nokia Profit?

The downside for Nokia, however, is that many punters still remain risk averse after America’s flirtation with the debt ceiling. As a result, forex trades, stock trades and other trades the world over remain low. Analysts at www.alpari.com still believe that the markets are being hampered by these risk aversion strategies. This, however, may be useful for Nokia’s low cost devices, particularly in times of economic strife. All in all, it appears as though Nokia’s stock may rise slightly in the short term, but the long term impacts may be even greater.

 
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