Nokia X: An Instant Hit in China

Zacks

Finnish handset developer, Nokia Corporation (NOK) received a million pre-orders in China for its upcoming budget-friendly smartphone – Nokia X. The smartphone – designed to run on Google Inc.’s. (GOOG) Android – is scheduled to hit the market on Mar 25, 2014.

At present, Nokia is targeting emerging markets where low-cost smartphones are expected to do well. However, Nokia X will not comprise the popular Google Play Store or other Google apps. The device will consist of its own proprietary app store and pre-installed apps like Here Maps and Mix Radio. It will also comprise Microsoft Corp. (MSFT) services like Bing search, OneDrive, Outlokk.com, and Skype.

Rising popularity of Android smartphones has encouraged Nokia to launch one. According to Gartner Research, sales of Android smartphones in 2013 rose 74%, whereas Windows Phone sales declined 5% year over year. Notably, sales of the Nokia’s flagship Lumia smartphone series, based on Windows Phone 8 operating system, also declined to 8.2 million in the fourth quarter of 2013 from 8.8 million in the preceding quarter.

We expect Nokia’s low-cost Android Phone to boost its handset business besides safeguarding its position against major smartphone manufacturers like Apple Inc. (AAPL) and Samsung. The device is also expected to gain popularity in the emerging markets. In fourth-quarter 2013, the company’s earnings surpassed the Zacks Consensus Estimate but revenues lagged the same.

On the other hand, uncertainties surrounding the Nokia and Microsoft deal, which was expected to close by the end of first-quarter 2014, persist.  Microsoft decided to acquire Nokia’s handset business for $7.2 billion (5.44 billion euros).

Nokia currently has a Zacks Rank #2 (Buy).

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