Buy Nokia (NOK)

You sure can’t say Nokia (NOK) isn’t pulling out all the stops to win back market share.

The company has announced that its U.S. retailer AT&T (T) will start selling its Lumia 900 smartphone, running Microsoft’s (MSFT) Windows Phone operating system, for $99.99 on April 8. That pushes the price (with a two-year contract) to half of the cheapest iPhone and Android phones.

On March 28 Nokia announced that starting in early April its Lumia 800C will be available from China Telecom (CHA). In the second quarter the company’s Lumia 900, 800, 710, and 610 models will be sold by China Unicom (CHU). A phone for China Mobile (CHL) is still in the works.

At the end of February Nokia made its first ever appearance at the annual Mobile World Conference in Barcelona where the company introduced six new phones built on its new Microsoft Windows Phone operating system. Not bad for the first year of the company’s new partnership.

Does all of this mean Nokia is back?

No way. At least not in 2012. The company is still bleeding market share in both the high-end smartphone market and in the mid-level feature phone market. The company’s share of the smartphone market could fall to 6% by mid-2012 from an already depressed 12% at the end of 2011. Operating margins are still falling and revenue is forecast to decline again in 2012.

But there are signs that new CEO Stephen Elop could see his strategy stabilize market share in 2013 with about 13% of the global smartphone market. That’s not enough to make Apple (AAPL) or Samsung quake in their boots or to restore Nokia’s stock to the $14.21 it sold for on April 6, 2010 or the $34.51 of November 6, 2007), but I can see $7.80 a share in a year. That would be a 44% gain from the March 29 price of $5.42.

Which is why I’m adding Nokia to my Jubak’s Picks portfolio today, March 30 http://jubakpicks.com/the-jubak-picks/

Why does Nokia stand a chance of recouping even that much of the market and its share price? Read more

It’s crunch time this month for Nokia–but odds look better than six months ago

Those positive reviews for Microsoft’s (MSFT) new Windows Phone 7.5 operating system are raising a smile in Redmond, I’m sure. But the big sigh of relief that you can hear is from Nokia (NOK.) That company bet its smart phone future on Microsoft’s operating system when it decided to sideline its own Symbian operating system in favor of Microsoft’s platform.

The transition has been extremely painful for Nokia as the company saw phone sales fall by 20% in the second quarter as Nokia, once the market share leader was passed by both Apple (AAPL) and Samsung. Nokia hopes to begin slowing the fall in its global market share against Apple’s iPhones and Android-based phones with new models expected to be announced at the yearly Nokia trade show in London at the end of October. (Assuming, of course, that Nokia can then get the new phones to market by early November to meet the holiday season.)

Nokia’s strategy looked very shaky after Microsoft announced its own attempt to get back in the phone game last year with Windows Phone 7. Reviews were generally positive but questioned if the operating system was ready to play with the big boys. Windows Phone 7 didn’t have Twitter support, Internet sharing, copy-and-paste, visual voicemail, or multitasking. All those competitive gaps have been filled in Windows Phone 7.5.

Plus the operating system has a unique look and feel that makes it something other than an iPhone wannabe. The home screen displays color tiles that represent collections of information and applications organized around a theme. The People hub, for example, collects contacts and social network feeds. The tiles also include automatic updates with things like newly received emails or calendar changes.

I wouldn’t say that Windows Phone 7.5 marks the end of Nokia’s troubles. Read more

Update Nokia (NOK)

Nokia (NOK) has put in a bid to be the other cell phone maker besides Apple (AAPL) to make a profit and have control over its business.

Now if the company could just get its new phone, the E7, out the door.

The success of Apple’s iPhone is built on the extraordinary power that controlling both he software and the hardware gives Apple. The company can make sure everything works together because it decides what gets on the platform and what doesn’t. No lame pre-installed apps from cell phone service providers. No word processing software that works differently in different programs on the same phone. No graphics that just kind of work.

Nokia is aiming for the same business model.

In early November the company decided to take full and sole control of the Symbian operating system for smart phones. To a degree Nokia had no choice. Its partners in the Symbian Foundation, set up to oversee the software, Samsung and Sony-Ericsson had abandoned the platform for Google’s Android. But Nokia decided that it would make the best of the hand it had been dealt: by taking over full control of the software, the company could customize the next version of the software for its next products and use it to develop a next generation operating system called MeeGo.

MeeGo is still scheduled to be introduced in 2011, but on December 14 Nokia announced that its new smart phone, designed to close some of the smart phone gap with not just Apple, but also Samsung and HTC, would miss the Christmas buying season completely. The phone wouldn’t hit stores until early 2011.

The delay isn’t a killer for either the E7 or for Nokia but it sure doesn’t do anything to help the company to regain momentum in the market. Read more

Update American Tower (AMT)

There’s no doubt that American Tower (AMT) is getting kind of pricy. Even after it beat Wall Street expectations for second quarter earnings. On August 3 the company reported second quarter earnings of 25 cents a share, five cents a share above Wall Street projections. Revenue climbed by 11% from the second quarter of 2009. At $469.9 million revenue came in about 1% ahead of expectations.

But the key metric for American Tower is price to cash flow. The company takes its cash flow and uses it to buy more cell phone towers (or to buy complete cell phone tower competitors). That in turn produces more cash flow, which American Tower uses to buy more towers.

(If you think that sounds like the financial model of a master limited partnership or a REIT (real estate investment trust), you’d be right. The company is thinking about putting some or all of its assets into a REIT structure, which passes through most pre-tax earnings back to investors. The timing looks like 2011 or 2012 depending on how quickly the company can put its net operating losses to work against profits.)

The current price to cash flow ratio at American Tower of 22.1 isn’t out of line with the company’s average over the last five years of 21 (the industry average, according to Morningstar is just 10.7), but the ratio is moving toward the top of the range set at 25.8 in 2006 and 26.2 in 2007. In 2004 the ratio was just 19 and in 2005 an even lower 17.5.

At these levels an investor is starting to price in much of the higher revenue growth that’s projected from the roll out of 4G cell phone networks in 2010 and 2011. I think it’s reasonable to project that EBITDA (earnings before interest, taxes, depreciation, and amortization) margins will increase in 2010 and 2011 as network operators increase their need for space on existing towers. Standard & Poor’s forecasts that free cash flow will grow to $789 million in 2010 and $975 million in 2011. That would be up from $641 million in 2009.

The problem is that the stock’s price already anticipates much of that good news. (Take a look at a chart of the stock, which shows the shares at the top of its Bollinger Band.) On the better than expected results in the second quarter I can get to a target price of $57 a share in 12 months, but that represents only a 10% gain in the stock’s price in a year from the current price. That’s not a bad return for a risk adverse investor—and I don’t think this stock is very risky at this point in the industry cycle—but it wouldn’t be enough to lead me to put new money to work in these shares. (For more on the short-term prospects for stocks see my post http://jubakpicks.com/2010/09/23/so-where-is-this-rally-headed-now-and-how-long-will-it-run/ )

As of September 29, I’m putting a price target of $57 a share by September 2011 on American Tower.

Full disclosure: I don’t own shares of any company mentioned in this post in my personal portfolio.

Update Nokia (NOK)

Watching the stock market right now is like watching paint dry.

Only not quite as exciting and with decidedly more side effects.

But while stocks aren’t going anywhere lately, some companies are. And it’s important to track which companies are taking steps now to make themselves stronger for the next spurt of growth in the global economy and which companies seem immobilized by current tough conditions.

I’d put Nokia (NOK) in the first group. Oh, the company hasn’t managed to solve its iPhone or Blackberry problems.  Nokia’s smartphones are still the laggards in the U.S. market.

But the company does seem, finally, to understand that it’s long-term business suicide for the world’s largest cell phone company to be an afterthought in the U.S. market. Business 101 says that you don’t let competitors have a big and profitable market to themselves so they can use profits from that market to attack your core markets.

I’d call Nokia’s move ground work that builds a foundation for Nokia to play a bigger role in the U.S. market. Sometime in the future when the company has a competitive smartphone model. Read more