Nokia's shares are currently in the tank due to being viewed as high-risk - too much competition at low, medium and high product ranges, pressuring margins; drop-off in overall world cell phone market Nokia's slowness in coming out with competitive smart phone and touch phone products; and uncertainty about whether Nokia's new direction in solutions emphasis will really work. Having spent a considerable amount of time in corporate strategic planning in my past life, my response is to offer up three brief scenario options that could happen through 2009, 2010 and 2011. I've also noted some Measurement checkpoints for future consideration. Comments? Other views?
Sisuman
NOKIA SCENARIOS – 2009 through 2011
1. Too Much Competition
o 2010 EPS = $1.00 - $1.15; stock price around $15.00 - $20.00; management’s 2011 view continues uncertain
o World cell phone market grows at 3-4% annually
o Nokia’s unit sales share erodes, as does its value market share, due to low end price competition; lags in smart phone and touch phone competitive entries
o Operating margin stays in the 10-12% range
o Samsung continues to gain 3% market share on Nokia each year; LG gains 1.5 to 2% each year; RIM and Apple continue to gain smartphone shares
o Motorola re-entry adds to price competition
o Solutions business misses active users targets and/or margins are below expectations
o Symbian and UI improvements are delayed and/or buggy
o Nokia U.S. market share stays below 10%
2. Conservative Nokia Growth
o 2010 EPS = $1.25 - $1.40; stock price around $20.00 - $25.00; management’s 2011 view is relatively good but conservative
o World cell phone market grows at 5-8% annually
o Nokia maintains unit and value market shares; Samsung and LG gain unit market shares; Apple and RIM keep positions as strong smart phone competitors
o Nokia fields more competitive smart phone and touch phone products, keeping pace with competitors
o Margins pressure continues, but operating margins grow to 13-15% range
o Solutions business grows, meeting active user targets, but not margin targets
o Nokia introduces CDMA cell phones with QCOM in mid-2010; U.S. market share improves into 15% range
3. Nokia Big Turnaround
o 2010 EPS = $1.50 - $1.75; stock price goes to $27.00 - $35.00; management’s 2011 view is very positive
o World cell phone business grows rapidly, driven by a combination of more cell phone buyers and more service purchasers
o Product volumes increase though unit market share stays at about 40%; value market share rises; smart phone products extend significantly down into lower price regions and are well accepted
o Nokia smart phone and touch phone entries are market leaders, driven by new Symbian platforms and S-60 UI improvements
o Solutions business beats expectations in number of users and margins, hurting Samsung and LG value shares
o Nokia U.S. market share improves to 20% range as CDMA products and marketing through carriers improves; LG market share in North America and Latin America drops off due to Nokia and Motorola improved competition
o Overall operating margin reaches high teens
MEASUREMENT CHECKPOINTS
o Nokia World in Stuttgart in early September
o Motorola re-entry in late September or October with Android phones
o October earnings releases; Nokia Solutions progress report
o Nokia Capital Market Day – December, 2009
o January, 2010 earnings reports
o Mobile World Congress – February, 2010
o Symbian platform release times |
