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Technology Stocks : Nokia (NOK) -- Ignore unavailable to you. Want to Upgrade?

To: Buckeye who wrote (790)	7/26/1998 9:04:00 AM
From: tero kuittinen	Read Replies (3) \| Respond to of 34857

During Middle Ages a small village in Southern Finland became a minor trading center for furs and pelts. At that time the original panteistic Finnish religion regarded certain animals so sacred that using their true names was taboo. The village was thus named after a euphemism describing a small, furry animal; probably lynx. The ancient Fennougrian word "nokia" was both the name of the first Finnish export commodity and the village that run the export industry. I'm not sure what the profit margins or sales volumes were, but probably not much. Finland lagged Romania and Bulgaria in per capita GDP by over 60%. Centuries passed: Christianity arrived to Finland, the word "nokia" became redundant now that animals had lost their totemic importance and dropped out of common usage, the village of Nokia lost its tenuous grip on northern skin trade and sunk into a sullen little backwater. And then, over half a millennium after Nokia had created Finland's first foreign trade opportunities, a small sawmill named "Nokia" was founded. The company never was all that hot in the forestry industry, so it had to diversify. In retrospect, that was probably a pretty shrewd move. I sometimes wonder what those medieval "Nokia employees" would have thought had they known that a trading empire named after their muddy little town would once span the world and be literally worth more than all the lynx furs in the world. Or that the name itself would play a crucial part in the creation of that empire: it was the close resemblance of "nokia" to Japanese language that gave the company its first break with foreign customers who thought they were buying from some Sony subsidiary. I think those ur-Nokians would have recognised some of the qualities of the modern Nokia people: grim determination and perseverance in matching their wits with creatures like "siemens" and "motorola", infinitely more cunning and dangerous foes than bears or lynx (though I'm starting to wonder about motorola). I can't help thinking that this progress from first Medieval Nokia exports to this quarters massive mobile phone bonanza somehow mirrors the actualization of the ancient Finnish dream of some day matching the legendary affluence of the distant sub-Polar circle economies. This adds mythical overtones to owning Nokia stock, something you can't say about stuffing your portfolio with Kimberly-Clark. I also cannot believe that I'm blowing my street credibility by posting this crap. That's the magic of Internet for you. OK, back to Earth. - how ironic that WSJ ran a big article the very day when Nokia announced, full of worried analysts pouring out their black little hearts about how Nokia might be experiencing margin erosion. The reality was the diametrical opposite: margins are expanding like there's no tomorrow. How could the analysts miss the obvious: that the unprecedented production volumes of the new models would also produce unprecedented margins? Lack of trust, I guess. That's why Nokia can still surprise people with their results: nobody quite yet realizes how good they are. - think this quarter was the ultimate high? Like hell. The sales of the 5100, which arrived in June have actually taken off faster than the initial sales of 6100, if you can believe that. The volume sales of those two models will hit third quarter earnings of Motorola and Ericsson quite badly. The initial sales of the new Art Noveau 8810 for the filthy rich should also do something: the margins on that puppy are topping 60%. - think the third quarter is the ultimat high? Like hell. The beauty of 1997 was that the phone sales growth slowed sharply in the last two quarters: in the fourth quarter the growth was a Motorolasque 9%. This makes this quarter a sitting duck for 4Q1998 comparison: the phone sales growth, fueled by the volume sales of 8810 and 6150 should top 60% or even 70%. - love that geographic spread. China 13%, USA 13%. The top two countries are now outside of Europe and experiencing the strongest growth as well. The sales growth in China is rumoured to be topping 100%, Nokia does not break down the numbers. - this shows just how gruesome the Motorola numbers were. Yes, there has always been a gap between the companies, but never like this one. Never 50% growth versus 0% growth. This is an international outrage. And the thing is, Motorola is not due to introduce high volume, mid-priced new phones anytime soon. The next 2-4 quarters will be like Dunkirk for Motorola. And what are they doing: introducing new Startacs for CDMA and TDMA, probably priced at 500$ to 700$ in the US market. They seem to be abandoning the mid-price and low-price digital phone markets entirely. It may seem to make sense, since making cheap digital phones is fiendishly hard and it's far easier to make a profit with executive phones. But it will also doom them to inhabit the low volume ghetto. Penny wise, pound foolish. -Ericsson, Ericsson... what were you guys thinking when you decided not to launch any new platforms in 1998? Did you think that 788 is really so hot that it will glide you into 1999? I don't think so. Apparently Wall Street does, since Ericy bounced so high after Nokia result. But here's the low-down: there can only be one. Ericsson is not Nokia's twin, they are in an entirely different product cycle phase and Monday should show us that Nokia is drawing blood also in Stockholm, first time in two years. I say Ericsson's phone sales growth won't hit 40%. And it will slow down below 30% in the third quarter. They have no answer to 5100 or 8810 even if they can still match 6100 with 788. -I wanna finally see some Fortune and Businessweek covers. I wanna see hysteric, herd-like buying frenzy a la Lucent. I think Nokia has earned it. They are just about the only high tech company in the world who have been able to completely sidestep the Asian crisis. They are now outpacing the mobile phone market growth, adding perhaps 2-4 percentage points to their global market share by year's end. They have stopped the challenge of the upstart companies like Siemens, Philips and Lucent cold while delivering a TKO to the over-the-hill world champ. They are one of the perhaps 2-4 Western companies who are making tons of money in China instead of spending it. - it's getting better... stop your wife from selling the stock now even if you have to tackle her. Tero