Nokia Corporation (ADR) (NOK): The Ship That Does Not Sail Might Surprise You

Nokia Corporation (ADR) (NYSE:NOK) has certainly been busy behind the scenes. While many are following the ongoing duopoly drama in the smartphone market between Apple Inc. (NASDAQ:AAPL) iOS and Google Inc (NASDAQ:GOOG) Android, Nokia has been doing its own thing with Windows Phone by Microsoft Corporation (NASDAQ:MSFT). And in some ways, it seems to be paying off, even if a little slowly.

Nokia Corporation (ADR) (NYSE:NOK) Market Share Ticks Up

While iOS and Android battle it out, Nokia Corporation (ADR) (NYSE:NOK) is finding some traction in the smartphone segment, grabbing as the solid No. 3 position in the market, according to a quarterly market report from IDC and reported by Janet Tu of The Seattle Times’ Microsoft Pri0 blog.

In the latest report, Microsoft Corporation (NASDAQ:MSFT) Windows Phone operating system improved its market share from 3.1 percent of the market in June 2012 to 3.7 percent as of June 2013, passing by BlackBerry Ltd. (NASDAQ:BBRY) as the No. 3 company.

Where does Nokia fit into this? Pretty highly, as Nokia is reportedly responsible for 82 percent of all Windows handsets in the marketplace right now.

While the smartphone market grew by 51 percent in a year, the number of Windows Phone devices shipped rose by nearly 78 percent over a year earlier (to 8.7 million units), while Android grew by 74 percent (to 187 million) and iOS by 20 percent (to 31 million). Android now makes up 79 percent of the market, while iOS is down to 13 percent from nearly 17 percent a year ago.

What does this mean for you Nokia Corporation (ADR) (NYSE:NOK) fans?

The Nokia handset is surviving; its growth rate is faster than the overall market, and Windows Phone is the fastest-growing OS in he market right now. While it has a long way to go to catch either of the Big Two, there  is certainly some encouraging signs that Nokia and Windows Phone are  catching on – taking up about 50 percent of the non-duopoly market share, meaning that Windows is becoming a viable No. 3 option. Not only does that make Nokia CEO Stephen Elop happy, but it certainly would put a smile on the face of Microsoft CEO Steve Ballmer as well.

Ryan Reith of IDC seemed to echo that when he said about the survey, “Last quarter we witnessed Windows Phone shipments surpassing BlackBerry and the trend has continued into the second quarter. Nokia has clearly been the driving force behind the Windows Phone platform and we expect that to continue. However, as more and more vendors enter the smartphone market using the Android platform, we expect Windows Phone to become a more attractive differentiator in this very competitive market segment.”

The Ship That Does Not Sail is the Partnership

This is only partially true when it comes to the partnership that was Nokia Siemens Networks (NSN). When Nokia Corporation (ADR) (NYSE:NOK) allied with Siemens AG (ADR) (NYSE:SI) to create NSN in 2007, the partnership worked for both sides – but especially for Nokia, which found that part of its company was making money while the handset side struggled mightily. The Economic Times reported Wednesday that Nokia had closed the deal to buy out Siemens from its 50-percent stake in NSN for about $2.2 billion, and Nokia quickly  changed the name of the company to Nokia Solutions and networks so as to retain the familiar acronym.

There has been no comment on record so far from Nokia Coporation (ADR) (NYSE:NOK) CEO Elop, who has been on the hot seat for what seems like the last six months and seemed to take  even more risk when he committed so much Nokia cash to the Siemens buyout. However, he seems to have a plan now that NSN is fully in the control of his company. And one of the first things Elop seems to be willing to do is to make the company’s profitable division even more profitable, as Bloomberg News is reporting that Elop is likely to cut about one-sixth of the NSN workforce, or about 8,500 jobs of the more than 50,000 worldwide employees, as a potential streamlining effort for the company.

This would be a new round of cuts, as Nokia Siemens Networks was trimmed by 20,000 over the last two years. Profitability is the name of the game for Nokia and for fund managers who have invested in the Finnish handset maker, like those who run Arrowstreet Capital – Peter Rathjens, Bruce Clarke and John Campbell, who tripled their Nokia stake during the March quarter to nearly 45 million shares, as well as billionaire Jim Simons of Renaissance Technologies.

For more, take a look at this video that compares the camera on the Nokia Lumia 1020 (the one with the massive 41-megapixel PureView lens) to what is on the just-released Moto X by Google Inc (NASDAQ:GOOG) and Motorola Mobility.

DISCLOSURE: None as far as stock holdings, but the author’s first cell phone was a Nokia, and he loved it.