It appears that mark veverka does one project and split it into many weeks of news reports as Barron's see fit. Here he is praising nokia and trashing aapl once again. the man, who i have not found any credible investment experience, likes to point to valuation more than other metrics.
- - - - - -- - - - - -
Nokia's Star Turn
By MARK VEVERKA
NOKIA IS READY TO TAKE CENTER STAGE.
The Finnish handset maker has secured the leading role just as the curtains are opening on the wireless world -- always on, always connected. Driven by an improved lineup of phones and impressive execution, Nokia has regained three percentage points of market share in just the past year, giving it a commanding 37% of the global wireless handset market, which itself is expected to grow 17% in 2007 and then expand at a double-digit clip thereafter. Its closest rival, Motorola (ticker: MOT), has stumbled badly, losing seven points of share last year to fall to 15%, as its hugely popular Razr cellphones continue to lose momentum.
Investors obviously have taken note of Nokia's gains: Its stock (NOK1V.Finland) has jumped by 65% to €24.33 ($33.77) since Barron's nearly two years ago highlighted the company's effective response to Motorola's threat ("Nokia Strikes Back," Nov. 14, 2005). But it's still relatively cheap, at a multiple of 17.5 times 2007 earnings. Consider the valuations given other tech stars: Apple's shares (AAPL), riding the iPod phenomenon and the potential of the stylish iPhone, now trade at a 37 multiple. And Research In Motion (RIMM) has a 43 multiple.
Even if Nokia shares climb 35% to €33 in the next 12 months, as Bernstein Research analyst Paul Sagawa expects, that would still amount to just 13 times his 2008 projection. Following Nokia's stellar second-quarter results, Sagawa last month raised his 2007 earnings estimates to €1.39, up from €1.29 and €1.87 for 2008, up from €1.59.
What investors have failed to realize is just how strong Nokia's position is and how much further the wireless market can grow, says Sagawa.
"People don't understand how much overall growth there is left in the mobile-handset business, and it's suicide for a smaller player to try to take on Nokia with regards to [product] price," he says. Sagawa looks for Nokia to post "double-digit unit growth without any price declines for some time to come." Nokia's operating margins from mobile devices, he notes, hit 21% in its strong second-quarter.
In the past, there was always the perception that handsets eventually get commoditized, squeezing Nokia's margins. But Sagawa argues that the game has changed because so few rivals can compete with Nokia's scale -- it cranks out one million devices a day -- as well as its manufacturing prowess and efficiency, technological expertise, strong balance sheet and disciplined management. As a result, Nokia can price its products effectively while continuously adapting to market shifts around the world.
And it has this position in a marketplace whose resilience could exceed analysts' expectations, says Sagawa. Wall Street, he explains, uses "new subscribers" data as a proxy for the number of phones in the world, but that relationship is flawed. Many people get multiple accounts for one phone, which inflates the phone totals, notes the analyst. For example, Europeans often buy pre-paid accounts in different countries to avoid heavy cross-border roaming fees.
"We're much further away from saturation than most people believe," Sagawa says, countering a common concern.
Nokia, whose American depositary receipts are traded under the ticker NOK, is winning some ardent fans. One hedge-fund tech specialist, even after seeing his Nokia shares double in the past two years says he's still a buyer. "It was my favorite tech company then, and it's still my favorite tech company," he says. "That never happens, but I can't think of any other tech stock that compares."
Under CEO Olli-Pekka Kallasvuo, Nokia seems to have learned a number of important lessons both from Motorola's rise and its fall. The one-time provider of galoshes to the neighboring Soviet Union has become more design-conscious and responsive in its products and less of a slave to its highly efficient manufacturing processes. It's also keenly aware of a big Motorola mistake: buying market share by cutting prices on a popular phone.
"We have to be absolutely brutal about design, look and feel," CFO Rick Simonson says, adding that Nokia had to "prioritize" and edit its product lines. "More isn't always better."
Indeed, Nokia executives seem to grasp where mobile communications is headed. For instance, the company recently introduced Internet services, called Ovi, that include games, navigation and music, among other capabilities. Services like these are likely to be the source of future growth and profits. The company can offer them to an installed base of some 900 million users. Persistent rumors that Google (GOOG) plans to enter the mobile-handset business suggests how enviable Nokia's position is.
Unlike in 2004, when the Razr caught Nokia off guard, the company now has a stellar lineup of phones in just about every price category and can appeal to every conceivable combination of consumer tastes. "Nokia has the greatest products in the industry, and that is just the tip of the iceberg," says another money manager.
In its robust second quarter, three popular devices emerged as solid winners, accounting for about 20% of Nokia's handset sales and nearly 30% of that segment's profit. They include the 6300, a mid-market thin phone, and the E65, an e-mail-centric enterprise device aimed at corporate users.
The third model is the N95, Nokia's flagship mobile device for 2007 and arguably the most versatile hand-held media computer on the market. It's a multimedia smartphone that does much of what an Apple iPhone can; plus, it takes digital pictures and surfs the Internet on both a 3G wireless network and Wi-Fi. About 1.5 million were sold in the second quarter alone -- at a suggested retail price of $700, nearly double that of the discounted iPhone.
AND BECAUSE OF ITS PRODUCTION flexibility, Nokia now offers several versions of multimedia and enterprise smartphones that hold a 56% share of the global smartphone market, according to New York-based ABI Research. In fact, Nokia has been named the top smartphone vendor in the world by ABI based on innovation and implementation.
"We have less reliance on a hit product than any of our competitors have had in the past," Simonson says. "We have more balance that way."
Nokia also has tuned into the power of mobile music. The company just introduced two music phones, the ...
(paid to see more of this junk) |
