Nokia (NOK)

Nokia recorded Q2 EPS of $0.37 on revenues of $21.0 billion, beating predictions for $0.36 and $20.3 billion, respectively.

Market share Increased

Handset sales were a slight miss but solid performance in the infrastructure business offset this weakness. Chief Executive Olli-Pekka Kallasvuo said Nokia’s market share increased to 40% during the period and predicted that sales by all manufacturers would climb by at least 10% this year (above a prior forecast for merely 10%). He noted that phone sales surged over 40% in Asia on record demand from India, but that “a lot more work” remains to be done in the U.S.

Forecast is encouraging

Going forward, Nokia expects to deliver improved product portfolio execution in H2/08 with the launch of new products at all ends of the quality spectrum.

Scotia Bank ( June 16th ,2008) believes Nokia is undervalued, giving it a "buy" rating and a price target of $40 after its CEO outlined future growth plans for the giant player in the "hyper-paced" Smartphone market.

Mr. Papageorgiou sees a substantial, prolonged upside for Nokia, following the investor reception he attended last week. In a note released Monday, he outlined the reasons for his optimism, including aggressive plans to compete in the high-end Smartphone market, so far largely dominated by the rivalry between Research in Motion's Blackberry and Apple's iPhone.

Nokia is launching a wide array of new Smartphones and repositioning its image away from the hardware / "mobile phone" tag, by integrating services with its handsets to deliver web-enabled customer solutions. "Although Nokia's primary objective with this strategy is to differentiate its device portfolio, its secondary strategy is to derive a new revenue stream," wrote Mr. Papageorgiou. Beyond web repositioning, the company also re-aligned recruitment recently, hiring many business and technology staff with specific Internet and e-commerce skillsets.

The Scotia Bank analyst also pointed to strong fundamentals such as low production price-points, and very high volumes that play in favor of the Finnish manufacturer, especially on the middle-market segment. Nokia's N-series multimedia devices shipped close to 10 million units in the first quarter of 2008 alone, he wrote.

The e-series business phone is less expensive than its competition and represents a promising avenue for growth in the U.S.

Nokia’s scale means it can expand into the emerging markets more easily than its competitors, even if it doesn’t work out an agreement with Qualcomm (QCOM).

China’s growing smartphones market is dominated by Nokia, with more than 69 percent of the market share. China Mobile has more than 600 million subscribers, with plenty of room for growth. Nokia has potential to grow in China’s market, especially when the global economy strengthens.

Nokia is very attractive as an industry leader; it earns high profits in the low-cost, mass consumer market.

Nokia is very attractive as an industry leader; it earns high profits in the low-cost, mass consumer market.