Lumia 800 |
Its first Windows
model, the Lumia 800, won some positive reviews but little interest from
consumers, with only 2 percent of Europeans in the market for a
smartphone saying they would pick it, according to a survey by Exane BNP
Paribas.
"This is not a game changer," a senior European telecom executive told Reuters of the Lumia, which uses Microsoft software.
Nokia's shares have
fallen over 20 percent since the October 26 launch of the new phone,
after investors decided it was unlikely to make a significant dent in a
market still dominated by Apple and Google .
Smartphones using Microsoft software have just a 2 percent market share, compared with Google Android at around 50 percent and Apple at 15-20 percent.
"There isn't much room left for a third ecosystem. The
smartphone market is consolidating fast," said Bernstein analyst Pierre
Ferragu who rates Nokia a "sell".
Smartphones are
built on mobile computing platforms, and the most modern combine web
browsers, navigation systems, cameras and portable music systems. A
so-called "feature" phone -- a market Nokia dominates -- has far fewer
of these applications.
Microsoft itself has started to hedge its bets, making
its software increasingly available for rivals to Windows Phone.
Even Nokia's old
Symbian software, which it decided to dump in favour of Microsoft, still
outsells Windows Phones by 10 to 1. And as Nokia keeps shifting to
Windows, sales of Symbian have a lot of room to disappoint over coming
quarters.
UPSIDE, DOWNSIDE
Another risk for Nokia investors is the possibility it will slash its dividend early next year.
Estimates from Thomson Reuters Starmine, which give
more weight to analysts with a better forecasting track record, show
dividends are expected to fall 60 percent from a year ago to just 16
euro cents for 2011, with the payout seen at 17 cents for 2012.
Forecasts from
Starmine also indicate earnings per share in 2012 and 2013 are set to
disappoint. Its EPS estimates for both years stand 12 percent below
consensus forecasts.
Some analysts are keeping the faith, however, believing
the new assault on the smartphone market may be enough to give Nokia a
place at the table. If they are wrong, the attractions of the handset
maker's strong cash position and some prized patent assets could yield a
takeover bonus.The shares, recently trading at around 3.65 euros, also look cheap to some. Many analysts cite an improvement in Nokia's product portfolio, which looked out of date when Stephen Elop took over as the chief executive in September 2010.
"With current, and
upcoming models, Nokia can win back market share in both -- in feature
phones and in smartphones," said Swedbank analyst Jari Honko, who has a
"buy" recommendation on the stock. "Today's share price does not take
into account any recovery in the Nokia market position."
And while some argue there is no room for a third
alternative to Google and Apple, some developers and operators do see
room for more competitors in this market.
The 2012 Windows 8
upgrade could attract a wider audience by giving making the way
smartphones, tablets and PCs work more similar.
For investors, the
biggest positive surprise could be an acquisition offer. After Nokia
signed a deal with Microsoft, rumours of full takeover by Microsoft or
at least buyout of smartphone unit have made rounds on a weekly basis.
Last week the stock jumped 4 percent when Danske Bank suggested Microsoft could buy Nokia's smartphone unit.
But even if
investors don't get a rich buyout - online gambling company Unibet is
putting odds on Microsoft buying Nokia in 2012 at just 15:1 - analysts
say the company's relatively-solid finances should at least offer some
security.
Nokia had 1.36 euros
per share of cash at the end of the last quarter. It also has a strong
patent portfolio - on its own worth more than a euro per share - and
owns top digital mapping firm Navteq and half of No 2 mobile network
gear maker Nokia Siemens Networks.
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