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Nokia's Spiral Deepens + Nokia's hardware expertise will be wasted if Windows Phone flops

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By Scott Moritz 04/19/11 - 09:57 AM EDT

NEW YORK (TheStreet) -- More signs of pain for Nokia(NOK_) was evident in Texas Instrument's(TXN_) first-quarter results.
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Production disruptions in Japan and troubles at a big customer (read: Nokia) caused the chip giant to miss its lowered targets Monday.

Analysts found Nokia's fingerprints all over TI's report of a sudden glut of wireless chips. TI said "weak demand at a single customer" contributed to a 33% rise in inventory levels in the quarter.

The unsold chips, according to Morgan Stanley analyst Ehud Gelblum's research note Tuesday, were likely due to a sudden drop-off in production of Nokia's Symbian phones. Gelblum warned that the effects may be a sign that Nokia's in for a rough year, and suggested that the analysts' target for 12% second quarter sales growth could be too high.

Nokia reports first-quarter earnings Thursday before the bell.

As investors know all so well, Nokia's failure to respond to a new generation of smartphones from Apple(AAPL_) and makers of Google(GOOG_) Androids has been devastating to the company's market share. Seeking a turnaround, new chief Stephen Elop boldly charted a new course for the phone giant built around Microsoft's(MSFT_) Windows 7 software.

But with the first Nokia Windows 7 phones nearly a year away, the interim period looks to be difficult.

Last week, MKM Partners Tero Kuittinen warned clients to sell Nokia ahead of the first-quarter results due to a continued disappointment and a lack of any signs that the company was on track for a speedy recovery.

The foremost problem, according to Kuittinen, is that Nokia lacks good phones.

"New models are deeply disappointing," Kuittinen wrote. And the cancellation of Meego phones, which had been expected this summer, "has left a gaping hole in the Nokia product roadmap for the next three quarters."

Analysts expect Nokia to report adjusted earnings of 13 cents a share on sales of $14.1 billion. For the full year, analysts are looking for sales to grow 7.4% over year-ago levels, according to Yahoo! Finance.

Nokia shares were largely unchanged early Tuesday, and are down 19% so far this year.


http://www.thestreet.com/_yahoo/story/11086968/1/nokias-spiral-deepens.html

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Nokia's hardware expertise will be wasted if Windows Phone flops
April 19, 2011 — 7:29am ET | By Phil Goldstein

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Phil Goldstein
Nokia (NYSE:NOK) is in an unenviable position. The company has to continue to profess, display and exhibit its support for Symbian while at the same try and convince the wireless world that its bet on Microsoft's (NASDAQ:MSFT) Windows Phone 7 is going to pay off.

I remain deeply skeptical that the partnership will produce a juggernaut that can grab market share the way research firm IDC predicts it will--capturing 21 percent of the global smartphone market in 2015. Almost none of that skepticism has to do with Nokia's abilities as a company. Instead, it is incumbent upon Microsoft to develop a self-sustaining dynamic that pushes the platform forward in the way that Apple (NASDAQ:AAPL) has done with iOS and Google (NASDAQ:GOOG) has with Android.

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I spoke last month with Kai Öistämö, Nokia's executive vice president in charge of corporate development. Öistämö, who has been with Nokia since 1991 and was the head of devices from 2007 through 2010, is a Nokia man through and through. Öistämö said Nokia will bring its expertise in carrier and market customization and localization to Windows Phone, as well as Nokia's Ovi services, while at the same time making sure not to not fragment the small (but growing) Windows Phone 7 developer ecosystem.

Most of all though, Öistämö harped on what makes Nokia truly proud: solid hardware. "In my opinion, I don't think any of the existing Windows Phone products are particularly appealing hardware," he said. "I think we can do a great deal in terms of a user experience and user appeal purely by actually applying our knowledge and capability in the hardware side."

"They are going to be the higher echelon of what these phones are supposed to be," ABI Research analyst Kevin Burden told me, referring to Nokia's Windows Phone gadgets. "Does that necessarily translate into success? The question comes down to: Is Windows Phone 7 going to be a platform that people are going to buy?"

Apple's model is based on a self-reinforcing dynamic in which its hardware sales feed into content sales from iTunes, the App Store and the iBooks store. Google essentially uses Android as an advertising monetization platform, and wants to expand that by moving into mobile payments and other areas. But what is the compelling model that ties together all of Microsoft's disparate entertainment, content and information elements? What pushes the platform forward once the novelty of Nokia's new phones wears off? I don't see it yet.

Of course, even though Windows Phone has largely been a dud in the U.S. so far, it's still early days yet. Microsoft is prepping a major update, dubbed Mango, for later this year, which will bring enhanced multitasking capabilities, expanded Office document support and a hardware-accelerated version of Internet Explorer 9. But the stakes have been set.

"There is no better partner than Microsoft has in Nokia," Burden said. "It can get out more phones than anybody. If it doesn't succeed with Nokia, then it's got some real problems. It doesn't have any more excuses."

"The potential is all there. The ingredients are all there," Gartner analyst Michael Gartenberg told me. "This is an execution play." In order to be the third horse, you have to be in the race. I'm waiting to see how Microsoft does. --Phil

Read more: Nokia's hardware expertise will be wasted if Windows Phone flops - FierceWireless http://www.fiercewireless.com/story/nokias-hardware-expertise-will-be-wasted-if-windows-phone-flops/2011-04-19#ixzz1JzaJlupp
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