The past few years have been interesting for Nokia Corp (ADR) (NYSE:NOK). Nokia stock escaped the smartphone business altogether in 2014, passing the brand name and related technologies to then-partner Microsoft Corporation (NASDAQ:MSFT) so it could focus on networking and internet technologies. That focus eventually led to a merger with Alcatel-Lucent, establishing what is now one of the market’s biggest telecom technology, cloud and wireless network plays.
The pairing made NOK stock one of the more promising prospects within the fast-changing telecom market, where the lines between telephone, internet and consumer technology are constantly blurred every day.
And then last week, the company surprised Nokia stock owners and inexplicably got back into the smartphone market it has less of a chance succeeding in now than it did just a few years ago.
NOK Stock: Here We Go Again
It’s called the Nokia 150, and it won’t impress. It will, however, allow its user to dial up another person.
The Nokia 150 is the company’s first phone in years — a so-called “feature phone” that’s low on features. It can’t connect to the internet, and won’t run apps. The all plastic phone will deliver 22 hours worth of talk time, and if not used, can go a month between charges. It’s fairly priced at $26, taking aim at consumers who are unwilling or unable to purchase a smartphone.
It will initially become available the Middle East, India, Eastern Asia and Africa, and then enter the European market in early 2017.
The Nokia 150 is only a preamble to a higher-end lineup of Android phones Nokia intends to launch next year, however. The Nokia P and the C1 were unveiled on Monday. The former sports a whopping six gigabytes of RAM and a 23-megapixel camera, with two screen sizes … 5.2 inches and 5.5 inches. The latter boasts a 5.0-inch screen and 4 GB of RAM, as well as a 16 megapixel camera.
The phones are expected to be affordably priced between $150 and $250, depending on the configuration.
On the surface, a mid-market Android device seems like a slam-dunk. NOK has a recognizable name, and there’s not much great competition in between low-end feature phones and top-tier devices like Alphabet Inc’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google Pixel or the Apple Inc. (NASDAQ:AAPL) iPhone. Before owners of Nokia stock get too excited though, they may want to digest a bit of reality.
It’s a Bad Idea for NOK – Just Ask BlackBerry
The superficial logic is sound enough … give consumers a good middle option. As it turns out though, smartphones are one market where no middle ground is actually needed, or even wanted, particularly from a manufacturer that isn’t decidedly mainstream. Those manufacturers are Samsung (OTCMKTS:SSNLF), Apple and most recently, Google. On the fringe is Huawei, with less than 10% of the market as of the most recent tally.
The phones made by the non-dominant names are fine phones, but in this case, much of the buying decision is driven by consumers wanting to buy the same phone a friend has. It’s difficult to “break in.” It will be particularly tough for Nokia stock to break back into the market after marring its reputation as the hardware behind Microsoft’s smartphone failure.
And, most consumers are willing to pay a premium price for a premium phone.
As of August of this year, of the market’s ten best-selling smartphones — which is the bulk of the market — nine of them cost $500 or more; some Galaxy 6S phones could be bought for around $450.
Consumers just don’t like change, even when a change would be in their best interest.
One only has to look at how BlackBerry Ltd (NASDAQ:BBRY) fared with its Android phones introduced earlier this year … the DTEK50 and the Priv, and more recently, the DTEK60. It’s still too soon to pass judgment on the DTEK60, but the Priv and DTEK50 have been pretty well panned in reviews despite being capable, very secure devices. And, both have sold poorly relative to expectations despite being priced at the low end of “premium” where NOK is looking to carve out a piece of the market.
Bottom Line for Nokia Stock
Sure, while the Nokia P and C1 may hit too much of a headwind in the smartphone arena, the 510 may secure a piece of the low-end market. But, at $26 a pop, so what if it does? Indeed, considering the only key contribution NOK made to the phone is its name (it’s made by licensee HMD), the company may only be pocketing a few bucks per phone.
In other words, of all the things current and would-be owners of NOK stock have to get excited about, this isn’t one of them.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
