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Nokia Inks Deal with AT&T

Zacks Equity Research

In an attempt to pump up Lumia sales, beleaguered handset manufacturer Nokia Corporation (NOK) has tied up with the second largest U.S. carrier, AT&T Inc. (T) to offer its latest range of smartphones, which runs on Windows phone 8 operating system (:OS). AT&T will become the first carrier in the U.S. to offer Lumia 920 and 820 when it will start selling the smartphone range from the next month. Nevertheless, Nokia and AT&T have not yet disclosed the price.

This is the second time that Nokia has teamed up with AT&T, as earlier, the Finnish handset manufacturer tied up with the U.S. carrier to sell Lumia 900, – the first LTE phone from Nokia’s stable. Inspite of AT&T supporting Nokia with its biggest phone promotional campaign, the Espoo, Finland-based company failed to capitalize and was forced to slash its price to get a better acceptance.   

According to Nokia, AT&T has committed to train its retail employees to market its latest product. However, the company faces tough competition from Asian manufacturer Samsung Electronics Co. and HTC Corp., who have recently come up with their own Windows-based smartphones.

At present, Nokia Corporation is in dire straits, losing in every front. It remains severely challenged owing to stiff competition, primarily from Apple Inc.’s (AAPL) iPhone and an array of other smartphone manufacturers using Google Inc.’s (GOOG) Android OS. However, teaming up with Microsoft hasn’t yielded any meaningful result as it still lags behind in the smartphone race.

On September 5, this year, Nokia unwrapped its latest Lumia offering, which runs on Microsoft Corporation’s (MSFT) Windows Phone 8 software. The company’s flagship Lumia 920 and the mid tier Lumia 820 with several new additional features is believed to be the last gamble from Nokia to win back the customer confidence in Windows-based smartphones.

Although Nokia has declared that going forward it will tie up with some more operators to launch Lumia 920, we believe that it is collaborating with AT&T to capitalize its marketing prowess. The embattled cell phone manufacturer will benefit from AT&T’s dedicated marketing effort, which will cut its own marketing cost besides providing the opportunity to tap the operator’s huge subscriber base. If AT&T could come up with an attractive offering then it is expected to bring some respite for Nokia in the lucrative North American market.

We maintain our long-term Neutral recommendation on Nokia. Currently, Nokia retains a Zacks #3 Rank, implying a short-term Hold rating.

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