Nokia Unveils Latest Gamble

In a last gasp attempt to stop its sliding market share Nokia Corporation ( NOK - Analyst Report ) has unwrapped its latest Lumia offering, which runs on Microsoft Corporation’s ( MSFT - Analyst Report ) Windows Phone8 software. However, the news failed to cheer the investor’s sentiment and consequently the share price plummeted almost 16% on September 5 to $2.38 on NASDAQ.

The company’s flagship Lumia 920 possesses – a 1.5GHz processor, 1GB of RAM, brighter 4.5 inch display and an eight megapixel PureView camera with Carl Zeiss lenses that allows sharp images even in low lights. Nevertheless, the most intriguing feature of the phone is the wireless battery charging and Nokia’s very own mapping and location services.

The company also launched Lumia 820, a smaller mid-priced smartphone with exchangeable covers. Nokia, however, didn’t throw any light on the expected launch date, pricing and carrier partners.

Owing to stiff competition from Apple Inc.’s ( AAPL - Analyst Report ) iPhone and other smartphone manufacturers using Google Inc’s. ( GOOG - Analyst Report ) Android platform, the company preferred Microsoft Corporation to develop Windows-based smartphones.

Meanwhile, joining hands with Microsoft haven’t been of any help to Nokia, as according to International Data Corporation (IDC), Microsoft only has a 3.5% market share while Android and iOS accounted for 68.1% and 16.9%, respectively.

This latest offering is believed to be the last throw in the dice for Nokia to gain the elusive third spot in the fast growing smartphone market. However, Windows platform only supports 100,000 applications as compared to Android, which supports 500,000 applications is one of the primary reasons for its limited acceptance with customers. Moreover, Lumia customers cannot upgrade their phones to the latest version, which is a major downside for the Finish handset manufacturer.

The success of the company could face stiff resistance as rival Apple Inc. is slated to release its much awaited iPhone 5 on September 12, 2012. Additionally, Samsung became the first company to launch smartphones based on Windows Phone 8 software, which if priced competitively possess the biggest threat for Nokia. Therefore, to attain success Nokia and Microsoft have to win over customer enthusiasm or else it will have to deal a serious blow to gain a strong foothold in the market.

The current Zacks Consensus Estimate for Nokia Corporation is pegged at a loss of 12 cents for the third quarter of 2012 with a growth rate estimate of (397.22%). For 2012, the Zacks Consensus Estimate stands at a loss of 38 cents with a growth rate of (200.46%) while for 2013, the Zacks Consensus Estimate stands at a loss of 1 cent with a growth rate of 96.47%.

Recommendation:

We retain our long-term Neutral recommendation on Nokia Corp. Currently, it has a Zacks #3 Rank, implying a short-term Hold rating.