October 22 is shaping up as a very busy day in the technology sector with events scheduled by Microsoft (MSFT), Nokia (NOK) and, probably, Apple (AAPL.) Apple is a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/
Got to wonder if new tablets from Microsoft and Nokia will capture any mindshare given Apple’s refresh of the iPad and a new iPad Mini 2.
Apple’s iPad 5 has been a long time coming—the iPad 4 was released about a year ago. Rumors say the new iPad will be thinner and lighter with an improved camera. The price tag is expected to be similar to past launches with a 16GB iPad selling for $499. If Apple follows past form, the iPad 5 would go on sale about a week after the event on November 1.
The big question on the iPad Mini is whether or not it will match the iPad’s “Retina” display. News from Apple’s supply chain says that Apple has been having production trouble with the Retina display for the Mini and that the company won’t be able to do a global launch of a Mini with that high quality display before Christmas. Other rumors say the Mini will be available in a variety of colors like the iPhone 5C.
Some analysts on Wall Street point to data showing that the tablet market shrank in the second quarter as evidence that there’s pent up demand for new tablet models such as the iPad 5 and the iPad Mini. Global tablet sales fell 9.7% to 45.1 million in the second quarter with iPad shipments falling to 14.6 million units from 19.5 million in the first quarter, according to IDC.
Microsoft is scheduled to announce the Surface2 tablet on that date. Nokia is expected to launch two products that day: the Sirius tablet and the Lumia 1520 tablet running on Windows Phone 8.
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , I liquidated all my individual stock holdings and put the money into the fund. The fund did own shares of Apple as of the end of June. For a complete list of the fund’s holdings as of the end of June see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/
News that Microsoft (MSFT) will buy Nokia’s (NOK) phone handset business (and non-exclusive, 10-year licenses to Nokia’s patents) for $7.2 billion sent shares of Nokia soaring—up 31.28% as of the New York close today—and shares of Microsoft tumbling—down 4.55%.
I think two things are behind the size and direction of these moves.
First, by selling its money-losing phone device business Nokia has removed the biggest worry about its continued existence—that it would run out of cash before it managed to turn around its phone business (if it could.) Read more
Nokia joins the phone parade: Rumor says it will join Apple and Samsung with September product announcements
Add Nokia (NOK) to the list of phone companies likely to announce a big product in September.
Rumor pegs a big Nokia announcement for a two-day event to be held in New York, maybe, in late September. The event, according to the blogs MyNokia http://mynokiablog.com/ and electronista.com http://www.electronista.com/, will launch Nokia’s first Windows Phone phablet (a hybrid of a phone and a tablet.) Rumors say the phablet will have a 1080-resolution display although the size of the screen is even less certain than other details about the product. The device would also be the first Nokia smartphone based on a quad-core chip instead of the dual-core chips in the Lumia 1020.
September is shaping up as a very busy month for phone makers as they attempt to steal some of the thunder from Apple’s new iPhone rumored for launch on September 10. Besides Nokia, Samsung plans a September 4 launch event for a new large-screen Galaxy Note phablet (a phone/tablet hybrid) and a smartwatch called “Galaxy Gear.”
Apple and Nokia are both members of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/, I liquidated all my individual stock holdings and put the money into the fund. The fund may or may not now own positions in any stock mentioned in this post. The fund did own shares of Apple as of the end of June. For a full list of the stocks in the fund as of the end of June see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/.
Nokia: Near-term good news in the mobile network gear market but long-term struggles remain in handsets
Nokia (NOK) climbed 3.21% today. (Nokia is now up 25.7% from the April 19 low and 10.8% from May 31 as of the close on July 1.)
Apparently the markets really liked the news that Nokia will acquire Siemens’ (SI) 50% share of their joint venture Nokia Siemens Networks for 1.7 billion euros ($2.2 billion.) Nokia Siemens is the No. 3 maker of mobile telecom equipment in the world behind Ericsson (ERIC) and Huawei.
What does the deal bring to Nokia? Read more
Investors weren’t happy to be reminded of how long a slog Nokia (NOK) still faces. The company reported earnings of 0.06 euros this morning, before the open in New York. That was a euro cent above Wall Street estimates. Revenue fell 19.6% from the fourth quarter of 2011 to 8.04 billion euros. That was just below the consensus of 8.06 billion euros.
The big news, however was that the company was suspending its dividend for 2013 in order to conserve cash. (Dividends in 2012 came to 20 euro cents a share.) In the quarter Nokia’s cash position improved by 800 million euros to 4.36 billion euros on December 31.
Yes, indeed management thinks the company has a tremendous amount of work ahead of it.
In the quarter the company managed to scratch out a very tiny positive operating margin in its device business of 1.3% (if you include one-time royalty income. Otherwise the device business broke even.) In the fourth quarter Nokia shipped 15.9 million smart phones with 4.4 million of those being the company’s new Lumia phones, 2.2 million being Symbian legacy phones, and 9.3 million being low-priced Asha feature phones.
The biggest problem for Nokia remains its lack of traction in the U.S. market. The company sold 700,000 phones in North America during the fourth quarter (out of global sales of 4.4 million.) That was ahead of the 300,000 phones sold in North America in the third quarter, but lagged analyst hopes for sales of 1 million to 1.2 million. (For context Apple’s (AAPL) global shipments of iPhones totaled 47.8 million in the fourth quarter.)
What to do with your shares now?
Nokia was heavily shorted going into today’s quarterly earnings announcement. (The shares were down 7.76% as of 2 p.m. in New York.) The company’s very positive January 10 preannouncement set up the actual earnings release to be a disappointment, especially because the company also lowered guidance for the first quarter of 2013. (I expect many of the shorts to cover in the next few days so if you’re looking to sell you might want to wait a bit.)
If you’re swing trading this stock, I’d wait to see if it might pull back further as analysts work that lowered guidance into their estimates for the first quarter. And then I’d wait some more for the company to actually report a fairly gruesome first quarter. Nokia has told investors that it expects operating margins in the first quarter for its device business of between +2% and -6%. Cash burn in the quarter is likely to be enough to raise fears again about whether the company might run out of cash.
If you are just holding the stock, patiently, for Nokia’s long-term recovery, I think your patience is going to be tried over the next few months. The stock was up 77% from November 8 through the January 23 close and it would only be reasonable to expect the shares to give some of that back in the next couple of months. I still expect Nokia to reach my target price of $7.80 a share but the shares won’t reach it without a pullback and consolidation—especially with the company’s guidance for the first quarter of 2013 as background. (Nokia is a member of my 12-18 month Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/, may or may not now own positions in any stock mentioned in this post. The fund did own shares of Nokia as of the end of September. For a full list of the stocks in the fund as of the end of September see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/