Nokia Has A Short Supply And Weak Demand For Lumia Phones

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Nokia Corporation (NYSE:NOK)’s latest generation of Lumia phones has been reported to be out of stock in major retail stores. The reports have associated the shortage of stock with overwhelming demand giving the company’s stock a bonus outlook. Nokia struggles to return to profitability and is using all means possible to try and give its stock some positive outlook.

Nokia Has A Short Supply And Weak Demand For Lumia Phones

In a report published Wednesday, Deutsche Bank AG (ETR:DBK) (FRA:DBK) (NYSE:DB) analysts, Kai Korschelt and Johannes Schaller reported that the current media hype on Nokia Corporation (NYSE:NOK), which seems to indicate that Nokia Lumia phones are in high demand, is misleading. The analysts believe that the stock-outs on Nokia Lumia devices are due to shortages in supply rather than overwhelming demand, and point out that the rising expectations on the device are disappointing.

In the report, the analysts wrote, “despite press reports suggesting strong Lumia demand, our retail & industry research suggests limited supply and muted consumer interest in Nokia’s latest smartphones. We maintain our Q4 Lumia shipment estimate of 4m and believe consensus expectations for 30-35m units in 2013 are too optimistic. Given a muted smartphone recovery and Nokia’s Mobile Phone business (65% of D&S revenues) likely seeing continue declines, we maintain SELL”.

The analysts also revealed that they conducted a consumer survey in the U.K., which showed that Nokia’s market share slipped below 10 percent in the country during the first weeks after the launch of the new Lumia phones. This is lower than what was realized post launch of the Lumia 800 in 2011. The analysts pointed out that strong momentum for Samsung’s Android smartphones, coupled with a decline sales and promotional support and meager Windows Phone platform market share as the key hurdles to the demand for the company’s new device.

The analysts added, “on a global level, relative Google search interest appears to be only at levels similar to last year’s Lumia 800 launch. Our analysis suggests current consumer interest could drive potential Lumia shipments of 5-6m per quarter next year, well below consensus expectations of 30-35m units for 2013”. Deutsche Bank AG (ETR:DBK) (FRA:DBK) (NYSE:DB)’s expectations are 23 million sales units for FY13.

In other news, the Finnish mobile phone maker reported Wednesday that it would be pressing charges against its rival, Research In Motion Limited (TSE:RIM) (NASDAQ:RIMM), claiming that the BlackBerry maker tried to infringe some of the patent agreements between the two. Media reports quoted that Nokia is looking to boost its royalties business as the mobile business continues to tumble.

The analysts reiterated their Sell rating on the Finnish mobile phones maker with a price target of EUR 1.50, citing a likely downside to their Q4 sales units estimates. The analysts wrote, “we continue to see limited consumer traction for Nokia’s Windows 8 devices in a highly competitive and duopolistic (Apple Inc. (NASDAQ:AAPL)’s iOS/Google Inc (NASDAQ:GOOG)’s Android) smartphone market. We also believe low-cost Android smartphones will start to cannibalize Nokia’s mobile phone business (~65% of device revenues) in 2013+, driving continued revenue declines here”.

At the time of this writing, Nokia Corporation (NYSE:NOK) stock was trading at $3.34 per share, up $0.07, or 2.08 percent increase form yesterday’s close.

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