Thursday, February 17, 2011

MKM Says Sell Nokia (NYSE:NOK)

Nokia (NYSE:NOK) isn't getting much love from the majority of analysts these days, and the latest to drop the hammer on them is MKM Partners analyst Tero Kuittinen, who recommends selling Nokia.

Concerning retaining top employees, Kuittinen said, "We expect mass defections from Nokia’s key hardware and software employees, as many are deeply disappointed about the company’s new direction. We also believe there are already concrete plans to move Nokia’s smartphone development to North America, and this project, if realized in 2012, further risks demoralizing the work force and creating disruptions in product development."

While that may be true, more important is the depth of the consequences over the short term in relationship to the lower end of the market for mobile phones.

"We think the new Nokia management is unwisely focused on smartphone development at the expense of a much-needed strong revamp of the feature phone platforms. The Windows crash development project has the risk of consuming the vast majority of management’s time and attention just when Nokia badly needs a new direction in the budget phone market, where its share was already sliding dangerously in Asia during 4Q10," concluded Kuittinen.

While it seems long-term Microsoft (NASDAQ:MSFT) will be a beneficial relationship for Nokia, they do need to keep their focus on that which has made them the No. 1 mobile company in the world.

To look primarily at the smartphone, or higher end market, could be a mistake, as that needs to be secured, and from there branch out into the more mature markets where smartphones are making their biggest gains.

Some point to losing traction in the smartphone market, but since Nokia really has little going there, that isn't a real concern. When they start throwing out products in that segment they really have nowhere to go but up in that regard.

To lose their lower-end market while pursuing a smaller percentage of the upper end is something they need to find the right balance with. If and when they do, it could be a major, positive move for the company.

Nokia was trading at $9.06, down $0.04, or 0.38 percent, as of 1:03 PM EST.

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