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Summary:

Options traders are wagering that Nokia will see shares gain 14 percent over the next several weeks. But there’s little evidence the Finnish mobile giant has really begun to turn things around yet.

Investors are betting that Nokia shares will gain 14 percent over the next several weeks, according to a BusinessWeek piece this morning. But even Columbo would have a hard time finding evidence for such an upswing.

The bullish options traders believe Nokia can begin to right a ship that has dramatically tilted in recent months. The company in October posted a brutal quarter and a surprise loss of $832 million due largely to write-offs in its Nokia Siemens Networks unit. Its presence in the U.S. market continues to wane and, as the BusinessWeek piece notes, Fitch Rankings cut Nokia’s credit ranking three weeks ago.

So why the hopeful wagering? From the story:

“Investors are betting that Nokia can’t continue to get things wrong,” said Michael Yoshikami, chief investment strategist at YCMNet Advisors in Walnut Creek, Calif… “The iPhone has been a wake-up call for them and they are starting to show that they understand the market has changed.”

That’s pretty flimsy logic, though, and there’s little to demonstrate that Nokia finally gets it. True, the company has made some smart, recent moves like halving its smartphone lineup, bringing Ovi to AT&T, and vowing to give Symbian a much-needed makeover. But it’s not like the market is getting any easier: In addition to the continued success of the iPhone and the hit Droid, Google’s Nexus One just came to market and Palm appears ready to launch the Pre with both AT&T and Verizon Wireless in the coming months. There are still reasons to be somewhat bullish on N0kia as the handset market rebounds this year, of course, but betting on a 14 percent bump in value by Feb. 19 seems baseless.

Image courtesy of Flickr user Hamner_Fotos.

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  1. Be interesting to see what’s in the keynote tomorrow at CES. Meanwhile, you’ve got a bad link under “a much needed makeover”.

  2. Unless Nokia announce something staggering during Mobile World Congress on 15th-18th Feb?

  3. I think Nokia still has a chance in the later part of this year on both the Symbian and Maemo fronts to become competitive again.

    Symbian^3, the first version of the new Symbian platform to really show some of the results from the move from Symbian, Inc. to Symbian Foundation, should be finalized this year and in devices sometime in late Q3/early Q4, and Maemo 6, supposedly the ‘5th step’ should be ready by then, as well.

    Of course, as you mention, it’s not like the competition (iPhone and Android) are resting on their laurels, either. However, I think it’s too early to call Nokia as out-for-the-count.

  4. brendandonegan Thursday, January 7, 2010

    As you said yourself, they wrote off a lot in NSN. This is over and done with so it’s hugely unlikely that they will have anything near as bad a quarter than that again for a long time.

    As for Nokia ‘getting it’, that’s fresh coming from the mouth of a tech blogger. Your points about their competitors not standing still don’t really tread much water. There’s no new iPhone this quarter so you must be out of your mind to suggest that sales are going to go up by all that much (if at all).

    I’d say they’re right on the money (I may even contact my broker soon)

    1. Well, January 27th is right around the corner…

      That said, I would never count Nokia out. But, I will continue to restate my web from top to bottom mentality. Betting on that now will reap big benefits in a couple of years.

  5. Thanks for the catch, Doc; the link is good now.

    @Ewan — You’re right that the timing is interesting. I’m not holding breath on any big news from them at MWC, but I’d love to hear something encouraging.

    @brendandonegan — I’m sure we’ll see a better quarter from Nokia this time than last given the NCN write-off, but Apple can continue (or even build on) its momentum without a new iPhone model due to growth in overseas markets.

  6. There’s often a lot of sillyness posted about Nokia on US blogs. From the US perspective of course it looks like Nokia’s a dead duck because the brand isn’t worth much there. In India the brand is huge and those Indians upgrading to a smart phone now have a realistic option in the N900. The N900, I should point out, was pretty hard to get your hands on in Finland before Christmas, so it’s selling well.

    So going from a huge writedown (the handset division was proftable) to a recovering market and with an attractive smartphone in the mix with more coming, 14% doesn’t look unreasonable.

  7. Bringing Ovi to AT&T was a process that started a year ago when Ovi Store was announced. So many operators worldwide have the store now that even the American networks who are usually way behind the rest of the world’s mobile technology usage have decided to jump on the bandwagon. Also the decision to redesign the UI on top of the still more powerful than most Symbian Operating System was announced two years ago now. And the design process of Nokia phones means that the decision about halving the smartphone line-up was probably anywhere from a year to three years ago. My point being that these things aren’t recent and have no bearing on this prediction at all.

    Your own point about the competition’s growth overseas actually has more to do with this. Just as Nokia’s competition is growing in new markets, they themselves are releasing new services in those markets, with mobile e-mail providing being the latest big one to be handed to networks around the world, and their phones are being sold with these services. In a country where most phones are bought SIM free (India for example) why would anyone buy a Blackberry for their family’s basic e-mail needs when you can get three or four feature phones for the same price with Ovi Mail compatibility and stay in contact that way, or a couple of Symbian phones with Nokia Messaging built in? Remember Nokia isn’t just betting on one model or even smartphones alone in order to make money, and are a well respected brand in most countries around the world and pretty much the name to beat.

    One final thing that could have a lot to do with this prediction is that, with the big work done in developing real fourth generation technologies (I’m sure you already know that Wi-Max was classified as a third generation technology despite Sprint’s advertising), Nokia is starting to reap the benefits rather than having to keep shovelling money towards research and testing.

  8. Nokia is not there in MWC, Barcelona this year, only NSN will be there this year.

  9. nokia is slowing down ..no doubt about that .but they still are a market leader in many markets except the usa

    they just need one great handset on at&t or verizon like the n900 and they would improve

    and the reason android is grwing popular is because iphone is becoming a bit boring

  10. Guys, Nokia won’t participate in MWC this time, remember ? So whatever expected will likely come out at Nokia’s own event.

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