It’s a first step, but only a first step.
On September 10, Nokia (NOK) named Stephen Elop to replace Olli-Pekka Kallasvuo as president and CEO.
In Kallasvuo’s four years at the top of the company, Nokia lost market share to Apple’s (AAPL) iPhone and other smart phones as the company seemed unable to bring a competitive phone to the consumer market. He pushed the company to develop services such as music downloads and GPS navigation but couldn’t gain much traction against Apple and Google (GOOG) in the services segment. Nokia trades at roughly 15% of its 1999 peak market value. The shares are down 60% since Apple’s 2007 introduction of the iPhone.
Elop, a Canadian, will be the first non-Finn to run Nokia. He was most recently at Microsoft where he headed the unit responsible for Office. Before that he was chief operating officer at Cisco-competitor Juniper Networks (JNPR). He was CEO of graphics software company Macromedia before it was acquired by Adobe Systems (ADBE).
How good a pick is Elop considering that Nokia’s biggest needs are in developing software and apps stores to compete with Apple and Google, and coming up with as smart phone that will create some consumer buzz? He’s an engineer by training although his stints at Microsoft and Macromedia do give him software expertise. The biggest hole on his resume, though, is the lack of consumer experience. Nokia has had difficulty in addressing the shift in the smart phone market pioneered by Apple’s iPhone from technology to design.
Elop officially takes over on September 21 but he hit the ground running, delivering the closing address at Nokia ‘s annual Nokia World event this week in London. The company showed off its new line of high-end smart phones including the touch screen N8 and tried to woo developers to its phones.
At the least, though, Elop’s background seems a good fit with Nokia’s need to keep up with Research In Motion’s (RIMM) Blackberry in the corporate customer market where the ability of a phone to integrate with a company’s computer and email systems counts for more than a hot design.
Don’t underestimate the magnitude of the turnaround job that Elop faces. Nokia’s share of the smartphone market fell to 37% in the second quarter from 45% in the second quarter of 2009, according to market research company Gartner. In July Nokia said its operating margin could fall to as low as 7% in the third quarter. In the third quarter of 2009 the company showed an operating margin of 12%.
Nokia is a member of my Jubak Picks 50 long-term portfolio (https://jubakpicks.com/jubak-picks-50/ ).
Full disclosure: I don’t own shares of any company mentioned in this post in my personal portfolio.
Thanks all, for your input.
Bill,
ABV is a tough one. It’s still a good company, but how much higher can it go? Until they improve earnings, and that is VERY possible, this one may have hit it’s peak.
If you have a better investment opportunity, I’d say sell the ABV and go with that. If not, do like Run26.2 suggested and get your original investment out and let the profits ride.
I liked ABV when Jim recommended it and like it even more now. I’m riding this pony!
High end phone market is mostly wiped off, and replaced by combined productivity + entertainment device with voice capability and choice of large number of applications. This is where both nokia and Rimm are struggling.
Nirvana for both noika & rimm is simply to embrace android. With an outsider at helm Nokia has chance to start fresh. Next few weeks are critical, If mr Elop decide to continue with Symbian, that will be end of Nokia.
Jim – I dont think Nokia can turn the ship around quickly or easily. And they need to be quick, given the speed of the changing landscape. RIMM & GRMN (in the GPS space) have seen rapid declines and once there, getting up is hard. The mgmt changes will probably play out over next 6 months and that in itself is an eternity in this space.
@foo – while I somewhat agree with you on the neg press, market share #s dont lie. Its a very widely held stock and investors dont dump it purely bcoz what is being said/written. Their financials and earning projection, global market share and rise of everyone from Samsung to Apple etc have to be taken into account. If you are right and think they can turn it around, then its a great investment oppty. I am rooting for them.
Happy trades.
Nokia makes a good phone. Their phones are reliable and signal usually strong when others start to fall off. Where Nokia fails is in their product line-up, user interface and service.
Product Line-up – Nokia has so many phones it confuses everyone. Instead of developing a winner, they develop a new line. For example, the E71 an E72 were winners but instead of improviing on them, they came up with the E5 and C3 which completely mess up the line.
User Interface – Anyone who use an E72 and then swops to a Blackberry Bold 2 will feel the difference. The mouse slider on the BB is smooth as silk, apps work while Nokia apps hang half the time, etc… etc…
Service – An example here. I bought Nokia BH-905 Noise cancelling headset thinking it is better than Bose. It broke down in 2mths. I took it to the shop, they told me it’s one-to-one exchange and they do not have stock. I waited 2 mths for replacement. I wanted to buy a spare cable and they don’t carry spares. Finally, I sold it and bought a Bose QC-15 and am so happy with it.
By the way, I bought Nokia shares and am regretting now. I wish they will wake up…
Bill,
If you are still bullish on the company and Brazil in general, I would suggest either sell now and wait for a pullback to 116-117, or hold and watch the 20 and 50 moving averages. If breaks below these sell. But if you bought just because Jim recommended it and he hasn’t updated his target sell it and take the profits.
@Bill: I’m not actively following ABV, but did look on Yahoo, and their target was $116, but also saw an article that referenced a 77% jump in Institutional ownership, which could accont for some of it’s rise.
You’ve got a couple options: Cash out; Sell off 1/2 or a portion of your owneship (I did this with PBR and am now playing with house money); Set a downside limit and sell once it hits or drops below (I sometimes use a stop limit, but mainly b/c I can’t be at a computer all day or am away for days at a time).
What you decide to do will depend on how you feel about ABV and your horizon. Just b/c Jim holds or sells does not mean you need to do the same.
Nokia has a very sound technology and product plan and they are delivering on it. Their handicap in the battle with Apple and Google is not functionality, software or technical deficiencies. It’s their image portrayed by the Silicon Valley blogosphere and repeated by US media. Their share and reach in the e-world is not proportional to the number of people or smartphone sales dollars they represent in the real world. But just because the media is full of the same general, broad sweeping statements about Nokia does not mean they are right. The facts and data speak otherwise. In US, Nokia today is overlooked and utterly despised, their products and services are considered a failure. In the rest of the world, it’s the opposite. This alone should make Nokia an interesting investment case.
Bringing in someone from Microsoft is like drilling holes in the bottom of a boat
Off topic:
I noticed ABV was above the target so I chose to take my profits at this time and sold at $120.
ssssoooo…why is Nokia a member of the 50 porfolio then?
Off topic:
Jim or Anyone,
ABV is above the target price Jim set for it ($118 by October)
Any thoughts from anyone? (Ed? STL? Run26.2?
Thanks