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Microsoft Corporation Message Board

  • likinnok likinnok Dec 10, 2012 3:10 PM Flag

    Microsoft Investment into Nokia Why is it such a suprise to the broadcoaster?

    Broadcasters on the financial channel say they cannot understand why investors are dumping AAPL. And why suddenly all the old stocks that feed off of MSFT are going up. How come NOK flew under their radar. It is public knowledge that Microsoft invented billions into Nokia (Nok). It was public knowledge that Nok gets a share of the ad profits from Microsoft on the Phones. It was public knowledge that the new WIN8 and Lumina phones were selling out and had rave reviews. How did they all miss the pop on NOK. The one bald guy that is on there every day and will be on there tonight says he does not understand it. Can you add? MSFT & NOK LONG TERM BUYS

    Sentiment: Strong Buy

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    • Microsoft entry into the cellphone market is being taken seriously by some pros even if not by common investors or talking heads on the media. APPL going down while NOK going down is no coinsidence. AAPL makes a large portion of its profits on the iPhone so that market is extremely important to them and their earnings. Despite the common misconception, APPLE does not own the smartphone market, Google-Android does. Google does not make anywhere near what Apple does off the phones because Apple makes $400 off every phone it sells. Google doesn't spend a whole lot of energy on Android because want to compete on price more than features. The problem for Apple with MSFT is that they have decided to get very agressive on their Win phone platform and will agressively upgrade and market it. Apple faces margin compression on a product because if consumers can buy something better at a cheaper price then they will be forced to cut prices. IF they make 200 dollars per phone instead of 400 then this is a big hit for apple.

    • You are a retard. M$ has killed Nokia, and now it has moved on.

      Sentiment: Strong Sell

      • 2 Replies to phands.theheretic5
      • Our agreement with Microsoft includes platform support payments from Microsoft to us as well as software royalty payments from us to Microsoft. In the first quarter 2012, we received a quarterly platform support payment of USD 250 million (approximately EUR 189 million). We have a competitive software royalty structure, which includes minimum software royalty commitments. Over the life of the agreement, both the platform support payments and the minimum software royalty commitments are expected to measure in the billions of US Dollars. The total amount of the platform support payments is expected to slightly exceed the total amount of the minimum software royalty commitments.

        From Nokia’s Q1 2012 financial interim report

        The figure of $250 million for Q1 is the same as the amount Nokia received for “platform support” in Q4 2011. This means Microsoft has paid $500 million over two quarters. During the same time frame Nokia shipped approximately three million Windows Phone devices. The average cost to Microsoft to acquire a Nokia Windows Phone user is therefore $167 per user. This is down from $250/user in the last quarter.[1]

        If the royalty is equivalent to a license fee then the more interesting question is how and when will the royalty payments nearly match the platform support payments as expected. This might give us an estimate of what both parties are expecting from the relationship.

        If the payment schedule of $250 million per quarter is maintained through 2014, Microsoft will have paid $3.25 billion to Nokia. This is well within the “billions of US dollars” range that is cited above. (The minimum would be $2 billion which would mean payments through the end of 2013).

        We also need to estimate the royalty payment structure. One figure that has been circulating for a long time is that Microsoft prices Windows Phone (and its antecedent Windows Mobile) at $15/unit. It’s an aggressive price point for a mobile software license and should be subject to volume discounts but let’s assume it’s correct. If it is correct then the only remaining question is how quickly will Windows Phone units grow at Nokia?

        One way to begin is to calibrate WP growth to iPhone growth. For the first two quarters iPhone and Lumia have sold at rough parity.[2] iPhone sold 1.4 million in its first quarter (including opening weekend sales of 270k in previous quarter) while Nokia sold “approximately” one million Lumias in its first quarter[3]. In the second quarter Nokia cited 2 million Lumia units and Apple had 2.3 million iPhone sold in Q4 07. So far Lumia is slightly under the iPhone ramp, but let’s give it the benefit of doubt.

        If we apply iPhone growth rates to Lumia then we have the following sales forecast for Nokia’s Windows Phones:

        This looks like healthy growth, as was the iPhone’s. However, this “iPhone growth” pattern only results in about $1.4 billion in payments in exchange for $3.25 billion from Microsoft, leaving a deficit of $1.9 billion in the “platform support” balance.

        To erase the deficit, I tried an approach where I assigned 3 million and 4 million for Q2 and Q3 shipments respectively then applied a constant (y/y) growth rate thereafter. Solving for a figure of growth which results rough parity with platform support payments gives us about 250% growth. The resulting sales profile looks like this:

        This ramp would result in 210 million Windows Phones shipped over about three years. It would also generate nearly $3.2 billion in “royalties” for Microsoft offsetting $3.25 billion in “platform support” payments by Microsoft to Nokia.

        There are many assumptions in this, royalty rate and length of contract chief among them, but the key question should be a sanity check: is this a feasible product ramp. It’s certainly far faster growth than Apple has been able to achieve. On average Apple obtained about 160% quarterly y/y growth. It also exceeds the growth rate that Samsung has been able to achieve (165 to 170 million smartphones shipped from a standing start three years ago). It implies 150 million units shipping in the third year of sales and nearly 50 million in a peak quarter. It assumes perhaps as much as 20% market share in smartphones in 2014. It’s certainly ambitious.

        But even if it’s achieved, it’s only a break-even point for Microsoft’s relationship with Nokia. It would imply that payments to and payments from Nokia would be in balance. The road to (dare one say it?) profitability for Microsoft in mobile would just begin to be visible at that point.



        Notes:
        1.What the quote above also reveals is that Nokia is also expecting to pay back some of these “support payments” in the form of “royalty payments” for the software. That’s an interesting word choice as usually an OEM would pay a license rather than a royalty for software. I’m not sure if this implies anything but it may.
        2.See also Charles Arthur’s analysis of comparable growth ramps for mobile phone platforms here.
        3.This figure was cited “to date” in a March statement so actual calendar Q1 may have been less, perhaps 650k.

        Sentiment: Strong Buy

      • Nokia sold 920 Lumia global sales, a breakthrough in distance from 5 million Nokia Lumia 920 near the release of a month, the world's largest manufacturers of WindowsPhone also announced its own a exciting to make your opponent frustrating data: this cell phone sales in the world has reached the 5 million department! Just last month, Nokia has just announced a 4.5 -inch mobile phone sales have more than 2.5 million, in a month's time is not that Lumia 920 and has sold 2.5 million. This cell phone seems to be global in scope, it is very popular and liked by their degree does not in any way diminish the signs. It was reported that the range of products has been in the United States, Germany, Australia, and many in stock. Although the iPhone Galaxy S III 5 and that there is a definite Lumia 920 gap, but this offer is only for a one-month cell phone, so there is no doubt the performance is very commendable. It is noteworthy that the NOKIA 920 Lumia owned the Nokia city Kaleidoscope (10,000 ) Nokia City Lens" GPS navigation and is considered the biggest bright spot, as well as Nokia Maps and location-based services in the suite of the latest features. In addition, Nokia drivers (Nokia Drive) and Nokia (Nokia public transport Transport), causes the map experience that the Nokia map and location service suite can provide is in all smartphones most comprehensive, integration rate is highest. At present the Nokia map meets to all has used cell phone opening of WP8 operating system. , Samsung and other mainstream manufacturers massively are even promoting the WP8 smartphone including Nokia and HTC.

        Sentiment: Strong Buy

    • Sorry, but no investors are "dumping Apple" and running to MS as you imply and it's most certainly not "public knowledge" (or even true) that 8 and Lumina are "selling out and had rave reviews". You are either (1) delusion or (2) a Ballmer lacky. If you are 2, I hope you're getting paid; otherwise, you're a real idiot for destroying your reputation for free.

      • 2 Replies to hcram906130
      • Who Stole Apple's Great Chinese Dream?
        By Umang Patodia - December 10, 2012 | Tickers: AAPL, GOOG, NOK | 13 Comments

        Share on emailEmailShare on google_plusonePrintUmang is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.

        China, with its huge population, is one of the most lucrative markets for all industries. Thus all the smartphone and tablet market players would like to expand their horizons by entering into the Chinese market. But the journey isn’t smooth, especially for Apple’s (NASDAQ: AAPL) iPhone 5.

        Apple got an early success with iPhone 5 as they managed to take a booking of 2 million iPhone 5's in the 24 hours within the start of pre-booking on Sept. 14, 2012. They have finally been able to meet the supply and demand curve, and they describe the pre-booking of iPhone 5 as “extraordinary” compared to its predecessors. The share price zoomed to its all time high of $700 during the launch of the iPhone 5.

        But the biggest problem for the iPhone 5 is the entrance into the Chinese market. This, coupled with some Maps issue in its latest OS, has led to a dramatic fall in the Apple's share prices. The share price of Apple plunged about 20% to $545 within a couple of months, which is indeed a very short span of time. This downfall is described by many analysts as a “classical break down.”

        A classical break down means the inability of the share to handle its consistent upward movement, which leads to a sudden dip. This is visible from the share price movement of Apple in the last 6 months.

        Source : moneydotcnndotcom

        In early December Apple finally received a green light from China when they gave the company permission to launch iPhone 5. Before they could start celebrating the success they received a shock when the world’s largest wireless network, China Mobile ltd., declined the addition of the iPhone 5 in their portfolio. As per the CEO of China Mobile ltd., Li Yue, they would not add iPhone 5 until they struck a profitable deal with Apple.

        Who gets the head-on then?

        To the surprise of many, Nokia (NYSE: NOK) takes a lead on Apple in this deal. Nokia signed its own deal with the Chinese mobile provider. The deal saw the operator agreeing to carry a version of Nokia's flagship Windows Phone 8 handset, the Lumia 920T, that has been tailored to meet the need of the Chinese market. This is the biggest hope for the sinking ship of the Finnish company.

        China Mobile had 703 million subscribers at the end of October, including 79.3 million high- speed internet users for smartphones. This will help Nokia give Apple’s iPhone 5 a tougher fight in the Chinese market. Apple did sign a few deeds with the small carriers like China Unicom Ltd. and China Telecom Corp., both of which sell iPhone 5 with a subsidy. But still. Nokia will hold an upper hand in terms of reach as far as the Chinese market is concerned.

        Nokia’s Lumia 920 also beats the iPhone 5 in terms of features. They have a higher CPU clock speed, a higher density pixel, a bigger screen size, along with a higher screen resolution. They also provide 42% more battery power, along with a distinctive wireless charging option. Nokia’s Lumia 920 is clearly the smartest of all the Smartphones in the market to date, and is the only ray of hope for the survival of Nokia, which has seen a huge dip in its market share over the last couple of years.

        The biggest threat

        The biggest threat, though, for both Apple and Nokia is the Korea-based tech giant Samsung. Their Galaxy handset that runs the Google (NASDAQ: GOOG) Android operating system holds almost 17% of the market share of Chinese market. A survey by comScore showed that in the three-month period ending in October, South Korea's Samsung was the top Smartphone manufacturer with 26.3% market share, up from 25.6% in the prior period. Meanwhile, Apple stands in second place with 17.8% market share.

        Google's Android is the biggest platform for the smartphone market, with a market share well over 50%. The biggest attraction for the hardware manufacturers towards Google is their open source structure. This allow investors to get a grip in the Smartphone market by just applying their hardware and relying on a trusted operating system, the Android.

        What’s the Journey Ahead?

        China is clearly one of the biggest battlegrounds for all the Smartphone players. The growth in the western market is due for a stagnant phase in the coming few years, which is quite known to all the giants. Thus, in order to continue profitable growth in the coming few years companies are trying their best to create a stronger foothold in the Chinese market. The the early success of Nokia in this market will surely be a confidence booster. But this should not lead to a laid back attitude, especially because of the continuous fight from Apple and the growing tech-giant Samsung. Can this ray of hope help Nokia turn things around? Or will Apple’s iPhone 5 succeed with or without China Mobile ltd. in the Chinese market? Only time will tell.

        More Expert Advice from The Motley Fool

        Google's long been the dominant leader in search, and with the Android operating system it's now attained a Windows-like market share in smartphones. Yet despite all this success, Google is largely flat across the past decade.

        Sentiment: Strong Buy

      • Our agreement with Microsoft includes platform support payments from Microsoft to us as well as software royalty payments from us to Microsoft. In the first quarter 2012, we received a quarterly platform support payment of USD 250 million (approximately EUR 189 million). We have a competitive software royalty structure, which includes minimum software royalty commitments. Over the life of the agreement, both the platform support payments and the minimum software royalty commitments are expected to measure in the billions of US Dollars. The total amount of the platform support payments is expected to slightly exceed the total amount of the minimum software royalty commitments.
        From Nokia’s Q1 2012 financial interim report

        The figure of $250 million for Q1 is the same as the amount Nokia received for “platform support” in Q4 2011. This means Microsoft has paid $500 million over two quarters. During the same time frame Nokia shipped approximately three million Windows Phone devices. The average cost to Microsoft to acquire a Nokia Windows Phone user is therefore $167 per user. This is down from $250/user in the last quarter.[1]

        If the royalty is equivalent to a license fee then the more interesting question is how and when will the royalty payments nearly match the platform support payments as expected. This might give us an estimate of what both parties are expecting from the relationship.

        If the payment schedule of $250 million per quarter is maintained through 2014, Microsoft will have paid $3.25 billion to Nokia. This is well within the “billions of US dollars” range that is cited above. (The minimum would be $2 billion which would mean payments through the end of 2013).

        We also need to estimate the royalty payment structure. One figure that has been circulating for a long time is that Microsoft prices Windows Phone (and its antecedent Windows Mobile) at $15/unit. It’s an aggressive price point for a mobile software license and should be subject to volume discounts but let’s assume it’s correct. If it is correct then the only remaining question is how quickly will Windows Phone units grow at Nokia?

        One way to begin is to calibrate WP growth to iPhone growth. For the first two quarters iPhone and Lumia have sold at rough parity.[2] iPhone sold 1.4 million in its first quarter (including opening weekend sales of 270k in previous quarter) while Nokia sold “approximately” one million Lumias in its first quarter[3]. In the second quarter Nokia cited 2 million Lumia units and Apple had 2.3 million iPhone sold in Q4 07. So far Lumia is slightly under the iPhone ramp, but let’s give it the benefit of doubt.

        If we apply iPhone growth rates to Lumia then we have the following sales forecast for Nokia’s Windows Phones:

        This looks like healthy growth, as was the iPhone’s. However, this “iPhone growth” pattern only results in about $1.4 billion in payments in exchange for $3.25 billion from Microsoft, leaving a deficit of $1.9 billion in the “platform support” balance.

        To erase the deficit, I tried an approach where I assigned 3 million and 4 million for Q2 and Q3 shipments respectively then applied a constant (y/y) growth rate thereafter. Solving for a figure of growth which results rough parity with platform support payments gives us about 250% growth. The resulting sales profile looks like this:

        This ramp would result in 210 million Windows Phones shipped over about three years. It would also generate nearly $3.2 billion in “royalties” for Microsoft offsetting $3.25 billion in “platform support” payments by Microsoft to Nokia.

        There are many assumptions in this, royalty rate and length of contract chief among them, but the key question should be a sanity check: is this a feasible product ramp. It’s certainly far faster growth than Apple has been able to achieve. On average Apple obtained about 160% quarterly y/y growth. It also exceeds the growth rate that Samsung has been able to achieve (165 to 170 million smartphones shipped from a standing start three years ago). It implies 150 million units shipping in the third year of sales and nearly 50 million in a peak quarter. It assumes perhaps as much as 20% market share in smartphones in 2014. It’s certainly ambitious.

        But even if it’s achieved, it’s only a break-even point for Microsoft’s relationship with Nokia. It would imply that payments to and payments from Nokia would be in balance. The road to (dare one say it?) profitability for Microsoft in mobile would just begin to be visible at that point.



        Notes:

        What the quote above also reveals is that Nokia is also expecting to pay back some of these “support payments” in the form of “royalty payments” for the software. That’s an interesting word choice as usually an OEM would pay a license rather than a royalty for software. I’m not sure if this implies anything but it may.
        See also Charles Arthur’s analysis of comparable growth ramps for mobile phone platforms here.
        This figure was cited “to date” in a March statement so actual calendar Q1 may have been less, perhaps 650k.

        Sentiment: Strong Buy

 
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