Shareholders don't hang up on Nokia

The phone-manufacturing giant today announced losses of £1.1bn in the last three months. Bad as it sounds, shareholders were actually expecting worse...

by Michael Northcott
Last Updated: 19 Aug 2013

If we didn’t know any better, we’d think that investors had lost their marbles, since today, Nokia announced that sales in the last quarter fell 19% to €7.54bn, and smartphone sales (where the company is desperately trying to make inroads) fell 34%. These may sound like absolutely catastrophic figures to the layman, but incredibly shareholders warmed to the company at the news earlier today.

With a company such as Nokia appearing to be in freefall as the smartphone market got away from it, investors will be pleased with anything that sounds better than they were expecting. The company has not used as much cash as investors originally feared: the company is sitting on €4.2bn net cash compared with the €3.7bn that analysts were predicting. In reaction to the news, shares rose 11.8%.

The company has been embattled ever since Apple’s iPhone was released and disrupted the market to such an extent that Nokia found itself trailing behind both Apple and Samsung. The latter two now have the market all but sewn up, with rival manufacturers RIM (BlackBerry) and HTC struggling to make anywhere near the kind of gains they would like. But there are some positive signs that there may be life in the old dog yet: the firm has actually managed to shift four million of its new smartphone, the Lumia, which uses a Microsoft operating system. 

Owing to a software glitch shortly after launch – and the seemingly unbeatable dominance of other rivals – the 10.2 million devices the firm has shipped this year is 39% less than the previous year. That’s a pattern that cannot continue if the company has any chance of making it through this decade. In an effort to revive its fortunes, Nokia halved the price of its Lumia smartphone, and to be fair some of us MT folk have actually seen the handset starting to creep into the hands of many a commuter on the way into work…

It’s yet to be seen how the battle of the smartphones will be won, and by whom. But for the time being, we reckon its safe to recommend Apple shares over Nokia…

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