Are investors crazy to bet on Nokia now? Probably

Shares of Finnish mobile device maker up despite huge fourth-quarter loss

Shares of Nokia (NYSE: NOK) were up as high as 4.7% Thursday after the Finnish mobile device maker posted a fourth-quarter net loss of $1.4 billion but beat analyst expectations for smartphone sales.

Nokia reported its Q4 numbers before Thursday's opening bell on Wall Street. Shares climbed to 5.52, up 4.7% from Wednesday's closing price of 5.27, before settling back down to 5.46 by late afternoon.

All because Nokia announced it sold more than 1 million Lumia smartphones in the few weeks they were available in Q4, exceeding average analyst estimates calling for Lumia sales of about 1 million units.

But Nokia's overall sales were down 21% to $13.2 billion as Symbian sales continue to fall, though the total of 19.6 million smartphones sold in Q4 topped estimates by about 1 million.

The Lumia phones are powered by Microsoft's Windows Phone mobile OS. Faced with an aging native OS (Symbian) and rapidly dwindling market share, Nokia early last year announced a partnership with Microsoft in which Redmond would make software and Nokia hardware for devices both hoped would help them carve out a respectable smartphone market share.

Nokia began selling Lumia phones in several European markets in November and debuted a cheaper version in Asian markets in December.

In the U.S., only T-Mobile currently sells a Lumia phone, though much larger AT&T is slated to begin selling a higher-end Lumia smartphone beginning in March. Nokia also plans to roll out Lumias later this year in China.

All well and good, but how much will the Microsoft-Nokia devices really sell? And is it smart to bet on a company that 1) still is losing a lot of money 2) has a generally untried and untested product, and 3) faces formidable competitors in Apple and Google, which together dominate the smartphone OS market?

Maybe, if you think a stock that was worth as much as $40 a share in late 2007 is a bargain today at 5.40 (which is not far above the 14-year low of 4.46 set last December 19).

Buying low definitely is a good idea, as long as you have a reasonable expectation that you can sell high. However, anyone counting on Nokia's stock price to climb is taking a leap of faith until the company can prove over several quarters that its Windows phones can carve out respectable market share.

That hasn't happened yet, and given how far ahead Apple and Google are with their smartphones -- not to mention Microsoft and Nokia's recent history of smartphone floppery -- it strikes me as a long-shot bet.

It also shouldn't elude investors that Nokia didn't break out Lumia sales, so there's no way of knowing what percentage of the "more than 1 million" sales were from low-end, low-profit models such as the Lumia 710.

Finally, investors should ignore crazy talk like this from Nokia CEO Stephen Elop: "In the war of ecosystems, clearly there are some strong contenders already on the field. And with Lumia, we have demonstrated that we belong on the field."

That's a prematurely brash statement, though relatively modest compared to what might come out of Microsoft CEO Steve Ballmer's mouth ("All those other smartphones are an embarrassment to technology. The Windows Phone will dominate and destroy.") We'll see what Elop has to say six months from now.

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