Could Nokia Corporation (ADR) (NYSE:NOK) finally recover? Is there ever going to be an end to all of the negative news we hear about the company? I think that the company has a great shot at making a comeback. After all, it has Microsoft Corporation (NASDAQ:MSFT) as a partner.
Here’s reality
There’s a definitive trend in declining momentum for both the company’s low-end and smartphone segments.
Source: Nokia
The company reported a 34% year-over-year increase in the average selling price of its smartphone devices. The increase in average selling price was driven by the transition over to Windows Phone 8. Total device volume has dropped by 49%. The company’s growth will become dependent on its Microsoft partnership.
The Nokia EOS device
Source: GSMArena
These are the leaked photos of the upcoming Nokia EOS. Perhaps the features that stand out the most about the product are the Windows Phone 8 operating system and the 41-megapixel camera. The camera sort of protrudes outwards, but when you consider the fact that it is a 41-megapixel camera I think that we can all make some compromises on the form factor. The device sports a 1.2 GHz dual-core processor and a 768×1280 pixel super AMOLED 4.5-inch screen.
The device isn’t bad, but it could be substantially better. Let’s start with the naming of the product: it’s called Nokia Lumia 1020. This needs work. No one should drop a long line of numbers next to a product name. Even Microsoft was smart enough to go from Xbox 360 to Xbox One instead of jumping to the Xbox 720.
The pros and cons
Nokia Corporation (ADR) (NYSE:NOK) will most likely improve the speed of its production and development cycle to match competitors like Sony Corporation (ADR) (NYSE:SNE), HTC, and Samsung. There is just too much at stake to let anything slide at this point. If Nokia shows up late it means having a product that’s below average. A cool camera isn’t going to sell itself and while it’s really nice to have 41 megapixels, the company will need to release a phone that has top specs in all categories (Snapdragon 800, 1080p, 2GB of RAM, Windows Blue.) Going forward, the company will eventually catch up to its competitors in phone specifications.
The company’s greatest asset is its use of the Windows Phone 8 operating system. The Metro user interface makes it easier for the average user to familiarize himself or herself with the product. It will be easier for the device to sync with the Windows 8 operating system and will allow for better centralization of applications. After all, an increasing number of applications are cross-compatible between Windows Phone 8 and Microsoft’s Windows 8. Going forward, the upcoming Windows 8.1 update will further standardize compatibility between the Windows 8 OS and Windows Phone 8. That being the case, Nokia’s greatest advantage is the power of Microsoft’s product ecosystem in laptops and desktops.
What’s different this time around?
Microsoft will be opening up shop in Best Buy Co., Inc. (NYSE:BBY). You read right, apparently Microsoft will be rolling out 600 new Microsoft stores within Best Buy in order to bring broader brand appeal. The whole computer department will instead be replaced with Microsoft stores that look reminiscent of an Apple store. Best Buy currently has 1,100 stores, meaning that half of them are being converted to contain Microsoft stores. As a result, it is likely that Best Buy will be able to see a significant improvement in its net income. The company’s comparable-store sales declined by 1.1% when compared to its 3.7% decline in its previous year. A partnership with Microsoft could eventually generate a year-over-year improvement in comparable-store sales.
The way it looks, both Nokia Corporation (ADR) (NYSE:NOK) and Best Buy will benefit from the partnership with Microsoft. Just recently, the ad geniuses at Microsoft (not Nokia) put together an amazing advertisement that more or less captured the dog fight between the smart phone vendors. Microsoft is providing 600 stores for distribution, just to make sure Nokia phones running Windows Phone 8 are able to get the distribution they need to stay in the smart phone race. Let’s also not forget that 5% of teenagers are planning to make the switch over to Windows Phone, implying that Nokia will be able to get a boost in sales going forward.
Best Buy may be able to turn around its operations through the partnership with Microsoft. I see better utilization of resources with Microsoft selling the product on the floor because it has more incentive to do so. Best Buy is becoming more and more like a technology mall; with Geek Squad in one corner and the Samsung store in another section, the company may have found an effective way to turn around both earnings and sales growth going forward.
Conclusion
Don’t count out Nokia Corporation (ADR) (NYSE:NOK) yet. While I am not completely sold on the Nokia EOS product, I do believe that the company has a decent shot at turning itself around. The company’s product distribution is backed by Microsoft, and if it were to make a significant improvement in product specifications then there could be a very real opportunity to take some serious market share away on a global scale.
Best Buy may eventually turn around its operations with a technology mall concept. Almost every major technology company needs a front-facing sales force to remain competitive these days, and Best Buy can provide that.
The article Nokia: The Turnaround of the Century originally appeared on Fool.com and is written by Alexander Cho.
Alexander Cho has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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