Nokia shares climbing on rumors of September 5 new Windows Phone 8 announcements

08/23/2012 5:06 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Now it’s Nokia’s (NOK) turn.

Last week Apple (AAPL) moved up strongly on rumors of new products. This week Nokia is getting the new-product rumor boost.

Of course, there’s some difference in the way a $665 stock (Apple) and a $3.14 stock (Nokia) respond to product rumors. Still Nokia is up 8.84% as of 2:20 p.m. New York time. That brings the stock’s gain since August 14 to a little over 26%.

What’s driving the stock? The scheduled September 5 Microsoft/Nokia press conference that’s expected to announce the roll out of new Nokia Windows phones.

Verizon (VZ) isn’t scheduled to be part of that press conference but informed speculation (a stage up from a rumor in my scheme of things) yesterday had it that Verizon, the largest U.S. wireless carrier, would sell a new Nokia phone with Microsoft’s new Windows Phone 8 software later this year. This would be the first time that Verizon has sold a Windows-based phone since May 2011. Selling a phone through Verizon would be a huge opportunity for Nokia, which has been limited in the U.S. market to sales at No. 2 AT&T (T) and T-Mobile. The Windows Phone 8 operating system would take a big step toward closing the gap with Google’s Android and Apple’s iPhone operating systems. The new phone software will run on faster phones with dual-core chips and higher definition screens, according to Microsoft.

Today’s rumor (August 23) is that Nokia will introduce two new phones at the September 5 press conference with Microsoft. The phones are expected to be part of the Lumia line. One, intended for AT&T, will have a polycarbonate body like other Lumias and a large curved-glass display. The other, a somewhat lower-end phone, is intended for T-Mobile. (For more on the two phones see this story on TheVerge.com http://www.theverge.com/2012/8/23/3259828/nokia-arrow-phi-lumia-windows-phone )

As of today I’m not changing my $6 target price for Nokia. Product introductions like these were always figured into my turnaround valuation. Now I’d like to see solid execution before I raise my target.  Nokia shipped 6.9 million Lumia phones in the first three quarters after the phone’s launch, according to Strategy Analytics. While that’s more than the first iPhone (3.7 million) or the first Samsung Android phone (1.3 million) shipped, it still leaves Nokia a long way behind the current ship rate for Apple (26 million in the second quarter) and Samsung (50.2 million smartphones.)

The good thing for Nokia is that the two new phone models  (plus three new HTC Windows Phone 8 models) mean that Microsoft will have enough devices to promote to justify a potentially huge marketing campaign for Windows Phone 8. And that’s exactly what Nokia needs to get traction in the U.S. market for its new smartphones.

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 not own shares of Nokia as of the end of March. For a full list of the stocks in the fund as of the end of March see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/

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