Nokia: The Slide Continues; The Ranks Of Former Bulls Expands
Eric Savitz Forbes Staff
Covering the intersection of tech and investing.
Nokia CEO Stephen Elop: Under fire.
The more investors think about Nokia (NOK) and its chances to succeed with its new partnership with Microsoft (MSFT), the gloomier they feel about the company's prospects for success.
Nokia shares took a shellacking on Friday following a meeting with analysts in London at which the company revealed plans to eventually adopt Microsoft Windows Phone 7 as the operating system for most of its smart phones, but only after a two-year transition period during which it will continue to focus on Symbian-based devices. (In an update to its original statements, Nokia now says it plans to get its first Windows-based phone to market by the end of this year.) The Street foresees two years of market share losses, as users and developers abandon the old platform; and even then, there is little confidence that the plan will ultimately succeed. Analysts greeted the deal with hoots, catcalls and downgrades on Friday, and this morning brought a rousing encore of more of the same.
HSBC Securities analyst Richard Dineen this morning reduced his rating on the stock to Underweight from Neutral. "We understand Nokia's thinking behind its decision to adopt Microsoft's Windows Phone as its primary smartphone platform over Google Android – fearing rapid commoditization were it to choose Android instead," he writes in a research note. "Nonetheless, we believe that this course of action is too little and too long-dated
to successfully turnaround Nokia's fortunes in the smartphone space."
Cowen analyst Matthew Hoffman lowered his rating on Nokia to Underperform from Neutral. "Nokia's embrace of Microsoft's Windows Phone 7 platform may indeed be the best way to create a "third ecosystem", but Nokia's inattention to the emerging tablet opportunity and ill-defined Symbian-to-WP7 transition plan leave us unsettled," he writes. "We now expect a lengthy and lumpy product transition with substantial overall unit share loss that results in earnings well below our previous forecasts."
J.P. Morgan analyst Rod Hall cut his rating on the stock to Underweight from Overweight. "Our Overweight thesis for Nokia was based on our opinion that market expectations for 2010 EPS were too low relative to what was achievable," he writes. "As we leave 2010 in the rearview mirror it is now time to look forward as the company embarks on a new strategy with a new CEO. We are concerned that short term execution difficulty represents high risk to 2011 and possibly 2012 earnings."
NOK this morning is down 42 cents, or 4.5%, to $8.94.
Making matters even worse for Nokia, the Wall Street Journal is reporting that Apple plans to introduce some new lower priced iPhones; such a move could make it even harder for Nokia to stop the steady erosion of its once-imposing market share in mobile phones.
Eric Savitz
After a long career at Barron's, I joined Forbes as San Francisco bureau chief in December 2010. I've been writing about technology and investing for more than 25 years....