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

To: Raymond who wrote (817)	8/1/1998 12:17:00 PM
From: michael c. dodge	Respond to of 34857

Informative post, Raymond.......Thank you. mcd

To: Raymond who wrote (817)	8/1/1998 12:39:00 PM
From: tero kuittinen	Read Replies (1) \| Respond to of 34857

Hi Raymond, You're right - Ericsson has a much stronger position in South America and that will be a plus for them. Nokia's network biz hasn't been quite as good this year as it was in 1998. But Nokia is coming up with new network technology next winter, so I wouldn't really base my judgement on Nokia on the announced deals in the first half of 1998. Nokia has been able to grow its infrastructure division faster than Ericsson for a year and a half now and that is a sign of strength. This is a somewhat cyclical business, just like handsets, so it's hard to compare the performances. However, Nokia does have one very substantial benefit over Ericsson: it is not saddled with a huge slow-growth, low-profit fixed-line division. To me, this is a big and permanent advantage. Motorola has the unprofitable semiconductor and pager divisions, Ericsson has the sluggish Infocom division, Alcatel and Lucent are also stuck with some extra baggage. Since Nokia is the only pure mobile telecom play around I wouldn't write them off just because their P/E ratio has ballooned. People who like Ericsson, Alcatel and Motorola keep saying that "look, mobile phones are only a small portion of their sales, they don't need to be the best in this department to do well". I strongly disagree. All these companies have poured hundreds of millions of dollars into mobile phone R&D. Their stock prices are propped up by expectations placed on mobile phone explosion. They can't just write off cellular phones. They are going to stick with this market until bitter end. We have already seen that unsuccessful mobile phone divisions can wreck the profit growth of huge companies like Philips. Like it or not, much or Ericsson's valuation rests on big hopes for its mobile phones and network success can't fully compensate for lackluster phone sales growth. Nokia is facing virtually no competition this year. But Ericsson will be launching their new platforms in early -99 against Motorola's simultaneous launch. Both will compete against relatively fresh Nokia models, some just six month old. The dynamics in -99 will be very different than in 1998, when Nokia is facing two-year old Ericsson technology and Motorola hasn't even got models in some standards. Either through luck or through devilish cunning, Nokia got a 6-12 month headstart against it competitors just as Chinese and US markets started igniting. Mainstream telecom analysts are ignoring this when they complacently proclaim that next year Ericsson and Motorola will be just as strong as Nokia is now. In 1996 Motorola had a lock in US market and Ericsson held 40% of the Chinese market. These were key strategic assets to these companies. It is already obvious that they will lose these crown jewels to Nokia during 1998. Nokia has never given up ground it has once won - even during 1997 it only lost two points of global market share when its aging models slowed down its growth. It will end 1998 in possession of European, Chinese and US markets, with production volumes substantially bigger than what Ericsson and Motorola can muster. I know it may look like a good idea to buy Ericsson or Motorola now that they seem affordable. But betting against the winner at this stage is like buying Fairchild Semiconductor during eighties - sure they were a bargain compared to Intel... but for a good reason. The dynamic duo of Monica Lewinsky and Kiichi Miyagawa might provide us all a real buying opportunity this fall. If that is the case (and I quote Celine Dion), Think Twice. Tero