Nokia Corporation (NOK) plans to partner with Verizon Communication Inc. (VZ) to sell new Lumia phones based on Microsoft Corporation’s (MSFT) Windows phone8 operating system.
If the two giants do collaborate, it will be seen as a welcome news for Nokia Corp as it will have three of the top 4 U.S. carriers under its stable, offering Lumia handsets. For Verizon it will increase the number of smartphones in its garage and reduce its dependence on Apple Inc’s. (AAPL) iPhone and other Android-based phones.
Owing to stiff competition from Apple Inc.’s iPhone and other smartphone manufacturers using Google Inc’s. (GOOG) Android platform, the company preferred Microsoft Corporation to develop Windows-based smartphones. Earlier, on April 8, 2012, the Finnish handset manufacturer partnered with AT&T Inc. (T) to sell Lumia 900, the first LTE phone from Nokia. Furthermore, T-Mobile USA became the first carrier in January 2012 to launch a Lumia series of smartphones in the U.S.
Both AT&T and T-Mobile USA will sell Lumia devices, which are based on Microsoft’s older generation Windows phone7 software, with Lumia 900 being the only exception as it runs on Windows phone7.5 software. Meanwhile, collaborating with Microsoft hasn't been of any help to Nokia since Microsoft only has a 3.5% market share, according to International Data Corporation (IDC), while Android and iOS accounted for 68.1% and 16.9% respectively.
On September 5, 2012, Microsoft and Nokia are all set to unveil the new Lumia smartphone based on Windows phone8 platform. Though Verizon intends to roll out the new device later, we believe that if Windows phone8 OS lives up to the expectations, tying up with the nation’s largest carrier will help Nokia to gain a significant market share in the lucrative U.S. market.
The current Zacks Consensus Estimate for Nokia Corporation is pegged at a loss of 12 cents for the third quarter with a growth rate estimate of (393.06%). For 2012, the Zacks Consensus Estimate stands at a loss of 38 cents with a growth rate of (199.54%), but for 2013, the Zacks Consensus Estimate stands at a loss of 1 cent with a growth rate of 96.55%.
We retain our long-term Neutral recommendation on Nokia. Currently, it has a Zacks #3 Rank, implying a short-term Hold rating.
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