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Is Nokia Corporation (NOK) A Comeback, or Another Short Play?

Nokia Corporation (NYSE:NOK) used to be on top of the world in the mobile and smartphone marketplaces, but pretty much since the iPhone by Apple Inc. (NASDAQ:AAPL) was introduced in 2007, Nokia has fallen each year in the size of its slice of the market pie, even as the pie got bigger. But with the launch of the Lumia 820 and 920 handsets last week – the flagship handsets for the company which will run the new Windows Phone 8 operating system by Microsoft Corporation (NASDAQ:MSFT), when it’s ready – the company has seen its stock rally a bit. Is this company going to be one of the comeback stories on the market, or is it just setting itself up to be yet another short option for investors?

Nokia Corporation (ADR) (NOK), Microsoft Corporation (MSFT)

There is one interesting analysis of Nokia Corporation (NYSE:NOK) that is fairly basic in that it looks at the raw numbers for the company starting with the first half of 2012 and going back three years. The company has shown reduced revenue, reduced margins and increased debt loads, according to several charts. One of the more striking charts shows the company’s margins since 2009 – after posting a gross margin of about 32 percent during the first half of 2009, that number has dropped to 35 percent in 2012, while the profit margin has plummeted from 1.5 percent to nearly minus-11 percent. This has mainly been blamed on lowered prices for phones to drum up sales, plus some restructuring efforts in the last couple of years that have eaten up some cash.

The other concern for anlysts of Nokia Corporation (NYSE:NOK) is the company’s debt ratio, which has jumped rom about 60 percent in 2009 (a more profitable time) to 67 percent now (and perhaps adding to it all the time). It’s possible that this trend may have to be reversed in pretty short oder.

While the two new Lumia handsets have gotten pretty positive eviews across the board as potentially solid competitors to Android or iOS handsets, it’s possible that the timing of the handsets’ release to the market will be problematic. Apple Inc. (NASDAQ:AAPL) is due to have its iPhone 5 ready for sale in stores next week, while the Windows 8 Phone handsets (like the Lumias) aren’t expected out until late October – and there are reports that even that may be delayed, as it seems the Windows 8 Phone OS is not quite ready for prime time, which may push the release date back into November. If that 5-6 week deficit becomes delayed much more, than Nokia Corporation (NYSE:NOK) and Microsoft Corporation (NASDAQ:MSFT) will be behind the 8-ball if the want to be viable in the smartphone space in the next 12 to 24 months.

And that alone may be enough to penalize Nokia Corporation (NYSE:NOK) stock in the long term. For now, the analysis suggests that Nokia may just be a short play for investors, unless some future variables turn in Nokia’s favor in the marketplace (like, Samsung having an import ban imposed, or Apple being found in violation of Samsung’s LTE patents with its iPhone). How likely those variables will open up opportunities for Nokia likely will depend on Nokia and its marketing plan with the so-far committed carriers, Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T).

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