Is Nokia Back On Track?

By Eugene Bukoveczky | September 06, 2010 AAA

Once dismissed as a major casualty of the intensely competitive global smartphone wars, shares of leading cellphone handset maker Nokia (NYSE:NOK) recently put a show of strength as major investment dealer Morgan Stanley made a dramatic move raising its recommendation on the stock by two notches to "overweight".

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According to Morgan, the new thesis for Nokia is that company could see its market share increase starting later this year, and even realize some price increases for its handsets next year.

New Smartphone Line Looks Hot
At the centre of this new-found optimism is the conviction that Nokia's new line of smartphones, which are due to be unveiled at the upcoming Nokia World annual media event next week, have enough standout features to be seriously popular with consumers. In fact, the pre-release buzz among some techno-bloggers has been so uncharacteristically positive that Nokia's new offerings have been favorably compared against Apple's (Nasdaq:AAPL) iPhone and other popular smartphone offerings sporting Google's (Nasdaq:GOOG) advanced Android operating system.

Software Key to Smartphone Experience
Getting the software right for its smartphones has been a major challenge for Nokia. It's the key to creating a compelling user experience. So far, it's Symbian software has been uninspiring. But, Nokia appears to have upped its game with the latest version. Looking ahead, the company's recently announced partnership with Intel (Nasdaq:INTC) to create the totally new MeeGo software from scratch is a sign that Nokia is finally getting serious about perfecting the user interface on its devices.

One rumored major payoff from this collaboration could be the launch of a Nokia-branded tablet PC by the fourth quarter of this year. Pad style computers have been a hot item ever since Apple launched its iPad earlier this year, and are expected to soar next year. In a recent note to clients, the tech analyst at UBS Investment Research forecasts iPad sales will hit 28 million units next year. iPad sales are already affecting PC sales. Clearly, a move into the pad computer market would be major plus for Nokia.

The Bottom Line
Once Apple launched its signature iPhone with is slick touch-screen technology, it forever altered consumer expectations of what the smartphone experience should be. Since then, Apple competitors have scrambled to duplicate or better it. Early indications are that Nokia's new line of smartphones may have met that bar, and in some ways surpassed it. Looks like the long-anticipated turnaround for Nokia has finally arrived. (For more stock analysis, check out Own Apple For Less Than Market Price.)

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