Nokia (NOK) Sticking to the Basics Could Provide Investors with Big Gains7:33 AM ET, 08/22/2012 - Street Insider
Nokia Corp. (NYSE: NOK) shares are significantly higher Wednesday amid positive sentiment throughout the market on gains in a market which lacks pizazz and glamor: cheap mobile phones.
According to Bloomberg, Nokia's Asha handsets are quickly becoming the favorite in growth markets like India and China. Though the device sells for about $39, trickle-down technology has cause more and more consumers to opt for the devices, bringing Nokia's basic-phone market share up to a two-year high at 35 percent.
Nokia derived 16 percent of 2011 revs from China and 7.6 percent from India.
Unit sales in the profitable division were 70 million units last quarter, allowing Nokia some breathing room as it looks for a stronger push in smartphones later in 2012. Sales of basic phones outpaced smartphone sales at Nokia by a ratio of 7:1, with revs rising 49 percent to 2.29 billion.
The basic phone unit also becomes an attractive asset in the eyes of a potential acquirer, with its profitability and dominant market position.
Key to the Asha's success is the resemblance to a higher-end smartphone. Some of the devices have full-length touch screens, social-networking integration, and ability to download apps. The underlying operating system and components, however, are still on the lower-end of the spectrum, reducing overall costs to Nokia.
Competition looms, with local OEMs ZTE Crop,, Huawei, and giant Samsung all still vying for a piece of the basic-phone market.
Should Nokia be able to keep up sales of the feature-rich devices, it could be smooth sailing for the beleaguered mobile device giant.
Shares are up 4.4 percent in pre-market trading Wednesday. |
