Believe it or not, the same company that had to pay the enormous consequences of missing the smartphone revolution for years is now having an amazing 52-week performance. In fact, with an unbelievable 135.1% price increase, Nokia Corporation (ADR) (NYSE:NOK) is by far the best performing stock among the most popular mobile device manufacturers, which include Apple Inc. (NASDAQ:AAPL) and BlackBerry Ltd (NASDAQ:BBRY).
Nokia Corporation (ADR) (NYSE:NOK), ladies and gentlemen, could soon make history once more. It may become an impressive case study, a must-read in all MBA programs: how a company once had it all, lost it by missing the smartphone revolution, but managed a turnaround in the end, after years of patient hard work.
Miracles can happen: The Lumia case
Behind Nokia’s recent success is its smartphone model Lumia and its outstanding performance in the past months. To begin with, in the latest quarter, Nokia Corporation (ADR) (NYSE:NOK) managed to sell 7.4 million Lumia devices, quite better than the 5.6 million figure for the March quarter. The downside is that the average selling price, or ASP, for Lumia phones decreased 14% sequentially, which indicates that Nokia is in the middle of an intense price war for market share, targeting price sensitive consumers. However, since Nokia Corporation (ADR) (NYSE:NOK) has been quite active in product releases for the low to mid-end smart phone market (see the Lumia 520 model), it is natural to expect a decrease in ASP.
Sell side analysts were disappointed at the 7.4 million figure, but this is no reason to become a bear. Keep in mind this represents a 32% increase from the previous quarter. It is also above management guidance (27%). Now, if you were to see the long run sales growth trajectory of Lumia devices, you will find out that Nokia is recovering significant market share against, for example, BlackBerry Ltd (NASDAQ:BBRY) devices. As a matter of fact, the number of Lumias sold in the last quarter is higher than the number of all phones sold by BlackBerry in the same quarter.
I expect Lumia to continue outperforming in terms of sales: Nokia Corporation (ADR) (NYSE:NOK) offers so many types of Lumias that it basically has all the market covered with different price points. Furthermore, it is aggressively addressing the promising low to mid-end segment, while companies like Apple Inc. (NASDAQ:AAPL) are not.
Feature phones are not doing so well, and Lumia sales are not yet high enough to offset the negative effect coming from the feature phone shrinking market. The number of feature phones shipped fell from 84 million units to 62 million units year to year. Also, the average sale price for these phones fell from $62 to $59.
The good news is that although Nokia Corporation (ADR) (NYSE:NOK) feature phone sales are shrinking, the company is committed to develop better feature phones, as the recent release of the Nokia 207 and 208 (which, for $68 per unit, offers 3G radios, Internet connection sharing, 30-day standby times and a camera) proved. This could help to make the shrink pace slower.