Nokia – Big fish. Small pond

WP is still a small pond but it has potential.

• The latest data indicates that Nokia is making progress in smartphones.
• Its slow progress but progress none the less.
• A recent report by AdDuplex group indicates that Nokia’s share of the Windows Phone platform has grown to 86.9%.
• More importantly sales figures have shown that the recently released Lumia 1020 is outselling the Lumia 928 which is a sign that shipments are beginning to accelerate.
• This comes as no surprise to me and I expect that Nokia’s dominance of this ecosystem to continue to grow for four reasons:
  • First: Nokia offers the best hardware bang for the buck.
  • Second: Nokia’s Windows Phone applications are by far the best written for this platform.
  • Third: Nokia has the widest range of devices to meet different price points.
  • Fourth: The other manufacturers don’t seem to care and are just keeping a toe in the water of Windows Phone to offset IPR risk from the Android patents that Microsoft holds.
• The problem is that ecosystem itself is still largely unknown to the wider phone-buying masses.
• In store demonstrations are poor at best and users walk out of the store not having the first clue how Windows Phone could enable them to live a cool and fun Digital Life.
• Consequently, they are still going with what they know: iPhone and Android.
• Nokia is working hard to fix this problem but it’s a slow process and without Microsoft really lending a hand, its going to take a while.
• The good news is that the bar is set very low.
• Guidance for Q3 is wide with Devices and Services margins expected at +2.0% to -6.0% giving a midpoint at -2.0%.
• Margins in Q2 were 1.2% and the developments I am seeing in the market indicate that they could be better in Q3.
• This would set the company up nicely for good Q3 results in October giving a nice run into its seasonally strongest quarter.
• The time is here to have another look at Nokia.