Nokia Plays it Safe with Windows Phone Launch Planned for Next Week

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In an earlier article, we had talked about how we believe AT&T (NYSE:T) could be the first carrier to launch Nokia’s (NYSE:NOK) Windows-based phones in the U.S. markets next year. But an invitation to a launch event in New York on December 14th, seems to indicate that T-Mobile may have beat out AT&T. [1] Although the invitation stopped short of saying exactly what they will be launching, a new filing detailing the Windows Phone handset on FCC’s website confirms that it is Nokia’s low-range handset, the Lumia 710, that will be launched next week. [2] Nokia had already launched its Microsoft (NASDAQ:MSFT) Windows-based smartphones in Europe last month.

See our complete analysis for Nokia stock here


Nokia’s taking the safe route

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We expected Nokia to try and make a spectacular US re-entry by launching its high-end smartphone, the Lumia 800, on one of the larger U.S. carriers, but it seems the company is playing it safe and taking measured steps in its U.S. plans. The low-end handset will appeal to a class of customers who are overwhelmed by the amount of technology a high-end smartphone can throw at the user and will hence take to the Lumia 710 better. (see Nokia Lays Out Plans to Woo ‘Smartphone Virgins’) These customers have so far not been serviced by the current high-end smartphones such as the iPhone 4S, and Nokia is planning to enter this niche segment to avoid confrontation with the market leaders.

Nokia’s strategy has been low risk from the start as the company decided to launch the smartphones in Europe first before entering the U.S. This was because it wanted to leverage its brand value and understanding of these markets to roll out its products before trying to push into unfamiliar territory.

Its decision to go with a smaller carrier first is also in sync with its risk-free plans as it doesn’t want to cause much of a concern to its well-placed rivals right away. Taking on Apple and Samsung could prove to be really daunting, as RIM has learned in recent times.  What Nokia now wants is to gain a foothold in the U.S. market before launching an assault on its smartphone rivals.

Falling share in developed markets

Nokia’s share in the developed markets has fallen from 27% in 2008 to an expected 17% this year. The handset maker has also lost more than 60 billion euros ($85 billion) in market value since Apple introduced the iPhone in 2007 and been forced out of the U.S. market as well. The company will be looking to stem the loss in coming years with its Microsoft partnership. However, we expect its market share to continue to decline, albeit at a less rapid rate, before stabilizing in the next few years.

If you believe otherwise, you may adjust the forecast line to reflect your expectations and see the corresponding impact on your price estimate.

Our $7 price estimate for Nokia stock is about 5% below market price.

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Notes:
  1. T-Mobile Sets Launch Event Wih Nokia For Dec 14, Forbes, December 7th, 2011 []
  2. T-Mobile Nokia Lumia 710 – confirmed through FCC manual, WPCentral, December 7th, 2011 []