Nokia climbs strongly on China Mobile news

12/05/2012 12:43 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

For the last few days all the important smartphone news has been about China.

On Friday, November 30, Apple confirmed educated speculation that the Wi-Fi versions of the iPad Mini and the fourth generation iPad will go on sale in China on December 7 and that the iPhone 5 itself will go on sale in China on December 14. This backs up a notice on a Chinese regulatory website that reported the approval of a “network access” license for a device that looked like the iPhone 5. China Telecom (CHA) and China Unicom (CHU) are expected to sell the phone. China Telecom chairman Wang Xiaochu said recently that he expected his company to get Apple’s phone by early December.

Today markets got confirmation that China Mobile (CHL), the third of China’s big three wireless companies, will start selling a model of Nokia’s new Lumia 920 that will be compatible with China’s homegrown TD-SCDMA wireless technology. (Bloomberg broke this story yesterday.) This would be a big deal for Nokia because China Mobile doesn’t sell iPhones (Apple’s phone isn’t compatible with China Mobile’s technology) and because—more importantly—China Mobile is the world’s largest mobile phone company with 703 million subscribers. Almost 80 million of those are users of high-speed, third generation services for smartphones.

Nokia’s shares are up 8.6% today as of 12:15 p.m. New York time. They climbed 5.5% yesterday. Shares of Apple are down 3.947%. Both stocks are member of my Jubak’s Picks portfolio http://jubakpicks.com/ . Nokia has been clobbered in the Chinese market with shipments to China dropping 64% to 5.8 million units in the third quarter of 2012.

Nokia has also received some good news from the European market recently. Apple and Android now command about 90% of the European smartphone market, and a big question has been what Nokia can offer to win back any of those customers. One answer that has emerged since the introduction of the new Lumia 920 appears to be speed. Apple’s iPhone 5 uses LTE technology to access the Internet at 4G speeds. But Europe’s networks don’t use the U.S. specific LTE frequencies supported by the iPhone. Nokia’s Lumia, however, supports European 4G standards, giving the phone higher speeds for European customers. That may—and so far the evidence is anecdotal—be an important selling point for European customers. Stories that European retailers have sold out their initial runs of the Lumia 920 suggest that the higher speeds do matter. I’m not sure that I’m willing to go from anecdote to conclusions about sales numbers since we don’t know if the Lumia 920 sold out because it was in such high demand or because initial orders by retailers were so low.

That uncertainty aside, the news from China looks to be real and it would be a solid plus for Nokia.

My advice for anyone trading Nokia is to hold on for now but watch for profit-taking and selling on the news just before the company’s January 24 earnings report.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , may or may not now own positions in any stock mentioned in this post. The fund did own shares of Apple and Nokia as of the end of September. For a full list of the stocks in the fund as of the end of September see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/

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