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Time to Buy Nokia Corporation (ADR) (NOK)’s Promising Future

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Nokia CorporationA lot has been said and written about Nokia Corporation (ADR) (NYSE:NOK) in the past few months — most of which has been negative — and it would take a superhuman effort for followers of the stock to make sense of it all.

On one side, we are fed with stats that show Windows Phone 8’s market share is steadily growing, albeit at the expense of Symbian, while on the other hand, Nokia Corporation (ADR) (NYSE:NOK)’s performance in the market continues to underwhelm and investors cannot understand why the stock continues to remain the black sheep of mobile and tech stocks.

It’s an open secret that Nokia is currently struggling to regain its foothold after losing out a huge proportion of its market share to smartphone titans. Here is a snapshot of how Nokia Corporation (ADR) (NYSE:NOK), with its Windows Phone 8 market share (4.6% market share in the U.S.) and Symbian (0.3% market share in the U.S.) stacks up against the leading mobile phone companies:

Apple and its iOS hold 39.1% market share in the U.S.

BlackBerry holds 0.7% market share in the U.S.

Google, with its Android OS, commands a leading 52% market share in the U.S.

Nokia has posted losses in seven out of the last eight quarters, and this obviously doesn’t go down well even with the firm’s die-hard proponents. Is there any reason to believe Nokia will emerge from this maelstrom and reverse the seemingly never-ending cycle of under-performance?

I strongly believe that Nokia might very well do exactly that; in fact, I’m strongly of the opinion that the company is on an inflection point and now is a good time for a contrarian investor to start looking for entry points on the buy side of Nokia’s stock.

Granted, an equity investor has to carry out his own due diligence and crunch the numbers before settling for any stock. But, to pick winning or promising stocks, you need to be more than a sophisticated bean-counter; you have to do a lot more than pore through volumes of a company’s quarterly and end-of-year reports mining thousands of data points.

If you are to be successful in investing in a company such as Nokia Corporation (ADR) (NYSE:NOK), you need to ensure that can stay liquid as the highly irrational markets search for the stock’s true value. In short, look beyond standard profitability metrics. Here are a few solid reasons why Nokia is set to surprise its skeptics and naysayers in the coming months:

1. Growing Nokia Lumia sales

2013 is probably the year when Nokia will make its much-awaited turnaround. Its Lumia 500 series, EOS, and 928 are all in the pipeline and are set to make their debut in 2013. Nokia has tended to be conservative with the production of its new phones in the recent past. J.P Morgan, however, revealed that Nokia has adequate capacity to sell 45 million phones in a phone’s 18-month cycle from birth to market, and this means supply will no longer be a thorny issue as it has been in the past.

Lumia sales came in at 7.2 million phones in the last quarter and sales are expected to grow 27% QoQ. This may not seem like much compared to Apple’s 45 million plus sales, but still is a significant improvement and looks to keep up the trend in coming months. Nokia Corporation (ADR) (NYSE:NOK) will manufacture more Lumia phones than has ordinarily been the case in recent times, and this will help the company reach out to more markets than before. Below is a snapshot of Lumia sales in the past few years.

1. Asha acceleration

Nokia’s Asha smartphone has had a bumpy ride in recent times; 9 million units sold in Q4 2012 followed by a near 50% drop to just 5 million units in Q1 2013. The release of Asha 105 and 200 series is expected to provide some boost to Nokia’s Asha platform.

Nokia’s management expects the Xpress browsing apps and the $20-phone segment to even out matters for both Asha and the company’s Mobile Phone Segment. Google Trends for emerging markets, where Asha and Nokia’s low-cost feature phones are popular, reveals that Asha and Lumia are receiving plenty of search activity using popular keywords.

Searches using “Nokia” and “Asha” as keywords as well as major rivals in developing economies grew as follows QoQ:

Asha Nokia iPhone Samsung
India 33% +20% +5.8% +3.75%
Cote D’ Ivoire No Data -8% -12% -8%
Brazil 0% -11% -13% +5%
Nigeria +42% -8% -10% 0%
South Africa -25% -13% -22% 0%
Ethiopia No Data +14% -10% -7%

This is a sample of the countries where Nokia Corporation (ADR) (NYSE:NOK)’s legacy mobile phones and Asha traditionally sell like hot cakes. Estimates for the coming quarter for Asha and Nokia’s low cost phones stand at more than 7 million. The introduction of ultra-cheap $20 handsets is expected to significantly increase Nokia’s sales in South America and Africa, in particular, where mobile phone sales growth currently outstrips all other regions.

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