Nokia

Nokia Corporation (NYSE:NOK) is set to report earnings shortly. Operating in a cut-throat industry, the Finish based smartphone company, is facing a do or die moment. RBC Capital is out with a report this morning noting the dangers the company faces. RBC states that Nokia Corporation (NYSE:NOK) faces the ‘danger of being the third of a third.’

Nokia danger of being a third of a third RBC sum of parts

By Third, RBC is refering to a third operating system, and it hasn’t been easy for Windows to become the third mobile OS. While Windows 8 offers meaningful enhancements, Windows Phone OS has yet to gain significant traction as an alternative ecosystem among developers and consumers. Carriers have been keen to promote a third ecosystem, but the debate lingers as to who the third manufacturer behind Apple Inc. (NASDAQ:AAPL) and  Samsung Electronics Co., Ltd. (LON:BC94) might be. Nokia may get marginalized in the Windows 8 OS space as Samsung Electronics Co., Ltd. (LON:BC94), HTC Corp (TPE:2498), and now Microsoft Corporation (NASDAQ:MSFT) are all inclined to push their own devices.

Additional concerns remain for the smartphone company.

Losing rapid share

Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) (6.9% share) continues to donate market share along with peers such as HTC Corp (TPE:2498) (6.2%),  Sony Corporation (NYSE:SNE) (4%), and Motorola Mobility Holdings Inc (NYSE:MMI)  (3.7%) as market leaders Samsung Electronics Co., Ltd. (LON:BC94) (34%) and Apple Inc. (NASDAQ:AAPL) (17.5%) gain share at their expense. Smartphone competition remains fierce and profitability remains elusive for smaller players, Nokia included.

December industry units to bounce… not much for Nokia

Smartphone market demand remains healthy and RBC expects a sharp sequential bounce (+33% QoQ) in global units in 4Q12 to 197M. However, Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) may see only a modest bump in 4Q. We expect total Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) handset shipments of 70M units (-5% QoQ) in 3Q12 and 72M handsets (+3% QoQ) in 4Q12. They expect Nokia to ship 7M smartphones in 3Q11 (down -32% QoQ), rising slightly to 8M units (up +14% QoQ) in 4Q12.

Consumers not too excited by Lumia 920/820 launch

RBC expects Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s new Lumia 920 and 820 smartphones to be available in November in the US and in Europe. Feedback on the new Lumia refresh remains mixed. While Lumia 920 is expected to have enhancements such as LTE, NFC along with strong mapping and camera-related functionality, investors’ expectations remain low considering the popularity of iPhone5 and the Galaxy S III.

Didn’t risk manage a concentrated bet

Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) may have taken a misstep in aligning its entire fortune with Windows 8, and in retrospect many believe Nokia may have been better off had it embraced the Android platform (or both). RBC believes that Nokia’s scale, existing distribution network, and strong brand equity in smartphones could have helped the company to retain its position as a major volume player; instead, more quarters of transition lay ahead.

RBC plays a price target of $3 a share on Nokia using a sum of parts analysis. Shares of the ADR, closed on Friday at $2.56.

Disclosure: No position in any securities mentioned in this article