Nokia Downgraded to Underperform - Analyst Blog

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Nokia Corp. ( NOK ) is currently in difficult straits. Recently, Nokia issued a revised financial guidance for the first half of 2012, which was significantly below its earlier guidance.

Nokia is in a transition phase for its legacy Symbian software-based mobile feature phones to Windows software-based smartphones and tablets. However, we remain very much skeptical regarding the success of the Nokia-Microsoft mobile venture.

Though Lumia smartphones are much improved offerings from Nokia, we are not very sure whether this device will be able to gain market share from Apple Inc. ( AAPL ) developed iPhone or Google Inc. ( GOOG ) developed Android based smartphones. Already, Nokia has suffered a serious software glitch for Lumia 900 device, its much hyped first 4G LTE enabled smartphone.

We believe the company will face margin pressure throughout 2012, mainly due to a highly competitive industry dynamics. We downgrade our recommendation on Nokia to Underperform.

Recently, Nokia suffered a major blow when its much hyped flagship Lumia 900 smartphone faces software glitch in the U.S. Lumia was Nokia's first 4G LTE-enabled smartphone. The U.S. telecom giant AT&T Inc. ( T ) was it carrier partner.

Nokia said Lumia 900 could at times lose its high-speed data connection and that the company would effectively give away the device for a short period. We remain concerned regarding Nokia's future business relationship with AT&T.

A firm carrier partnership is a precondition in the U.S. for the commercial success of any mobile phone. For smartphones, this is a necessary condition since these feature-rich phones are very costly for which carrier subsidy is required to offer a competitive price.

A major concern for Nokia is its apparent difficulties in understanding the importance of the carrier-manufacturer partnership in the U.S. Therefore, the company is being increasingly marginalized in the lucrative U.S. market.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: AAPL , GOOG , NOK , T

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