Monday, November 05, 2007

Nokia (NYSE:NOK): Nokia hit by second-tier insurgency - Avian Securities

Tero Kuittinen from Avian Securities has some interesting comments on Nokia (NYSE:NOK) this morning saying two new 5 megapixel camera models from smaller brands are topping sales charts in Europe – both Samsung G600 and Sony Ericsson K850i have started outselling Nokia N-95 by comfortable margins in the United Kingdom. These two new 5 mega models are considerably thinner and lighter than Nokia N-95, which is at six months after its launch is starting to show its age. Judging from the high interest in Samsung G600 and Sony Ericsson K850i it’s clear that the 5 megapixel camera module will indeed be one key driver of high-end phone demand in Europe in 4Q 2007. By end of October, the Sony Ericsson K850i was outselling all of Nokia’s high-end models in France and Germany – a notable switch from 3Q 2007, when SE was a bit weak.

According to Kuittinen, it’s not entirely surprising that the brand new lead models from Samsung and Sony Ericsson are outselling Nokia’s 6-month old flagship phones (N95 and Nokia 6300) in the last weeks of October. What is noteworthy in their view is the series of tepid debuts of Nokia’s new 6000 series phones. The 6080, the 6070, the 6500 Classic, the 6500 Slide, the 6288 – all of these models are having some trouble finding traction.

He thinks it’s clear that Nokia’s management is aware of the situation – this is why Nokia elected to not guide for global market share gains in 4Q 2007 and even took the unusual step of pointing out that Nokia did not gain share in Europe in 3Q 2007. It’s hard to get a full picture of 4Q market share situation, particularly because the LG990 is still in early stages of ramping up and Samsung’s biggest model and iPhone are yet to launch.

At this point Avian projects that the Top Five charts of UK and German contract phones at the end of November won’t include a single Nokia model. The N-95 and N-81 simply aren’t getting the operator support or media buzz to help deflect the surge of several second-tier brands. Nokia's share price continues floating serenely close to its multi-year highs. In firm's view, investor complacency is not warranted. Multimedia device operating margins may dip by 2% in 4Q and even the main phone unit margins may come down a point as Nokia's European market share is now in decline and the pricing pressure on the rise.

Notablecalls: First of all, I'd like to welcome Tero and Avian Securities among the growing base of research providers that have elected to send their stuff directly to Notable Calls. Talking to my buddies still working on the Street, I hear NC is getting lots of traction among the trading community. That is, of course, music to my ears.

Secondly, when was the last time you heard anything negative on Nokia? I've been reading Tero's musings on the Handset space for as long as I remember. This guy is definitely worth listening to!

Not saying short NOK here but based on Tero's comments, the next leg may not be up!


Derek said...

This call may be in direct conflict with your RFMD call. It will interesting to see if NOK results effect P3 ramps for NOK in the future.

notablecalls said...


Same thing crossed my mind.

Not sure what to think of this. NOK seems more vulnerable to neg chatter than RFMD, though.

Derek said...


Agreed. Looks like RF has held at the old previous bottom. But with MOT still hurting, RF's reliance on NOK is even more important. Let's hope Samsung can pick up the MOT volume.