Nokia Lumia for as low $39- VZ, GOOG, RIMM, & AMZN

I have just written on a growth roadblock for the pharmaceuticals industry i.e. revenue depletion amid patent expirations. An almost similar roadblock is there for the highly volatile and hyper competitive Smartphone market i.e. revenue depletion with hefty consumer discounts to grab share away from competitors. Is it good investment strategy to spend more to surpass the competitors’ quality and then sell at a loss? Most investors doubt that.

Take Nokia’s latest $99 Lumia 920 phones for example which is currently available at Verizon (NYSE:VZ) (Nasdaq:AMZN) and Deutsche Telekom’s. T-Mobile for as low as $39. That seems like  more than a fair compensation for the emotional-switching costs a righteous iPhone enthusiast would incur. But isn’t that just another question mark on Nokia’s ability to skim the market on the basis of quality? More importantly, what share of the pie would be left for the investors, the real stakeholders in the corporate once the consumers discounts are done?  Lets have a look at that.

The company’s China Mobile (NYSE:CHL) distribution deal could add 700 million to the consumer base but even that big a customer base at only a yaun price equivalent to $0.16 is difficult to digest for few investors.

Discounts on new products make you feel like going Awww….!! Am I in for a glitch? Of course the carriers data plan subscription makes up for the differential but cell phone manufacturers do end up paying a part of the bill.

But there is always another side to the picture. Lumia920 is a strong competitor for Apple’s (Nasdaq:AAPL) iPhone5 and Google (Nasdaq:GOOG) Nexus. Nokia’s market value has jumped 84% since June and dividend yield stabilizes at 6.5%. Add to that the $650 million annual projected revenues and the Cashflow injection from the patent lawsuit against Research In Motion (Nasdaq:RIMM); a stout $150 -$200 million up front and $50 million annual installment for next 10-15 years.

Those skeptical of the consumer discounts by Nokia are seriously overlooking the investment potential that lies within a stable financial structure, a five star patent  portfolio and a diversified revenue base.

The shares of Verizon (NYSE:VZ) were down by 1.33% to close at $42.9. The shares of Google (Nasdaq:GOOG) were down 0.89% to close at $700.01. The shares of Research In Motion (Nasdaq:RIMM) were up 0.26% to close at $11.79.

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Published by Christine Lawrence

Christine Lawrence is a financial analyst. She loves analyzing socioeconomic trends in the background of financial moves. She has overall seven years of experience in Auditing, Finance and Writing.

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