Foolish Forecast: Neglect Nokia at Your Own Peril

Thursday morning, waaaaay before the markets here open, Finnish mobile phone mogul Nokia (NYSE: NOK) reports second-quarter earnings. Check out fellow Fool Tim Beyers' take on the first-quarter report before you get back to this update -- which has a much happier ending.

What Fools say:
Here's how Nokia's CAPS rating stacks up against some of its peers and competitors:

Company	Market Cap (billions)	Trailing P/E Ratio	CAPS Rating (out of 5)
Apple (Nasdaq: AAPL)	$151.4	35.4	****
Nokia	$94.8	8.3	****
Research In Motion (Nasdaq: RIMM)	$60.5	39.6	***
LM Ericsson Telephone (Nasdaq: ERIC)	$35.0	11.0	***
Motorola (NYSE: MOT)	$15.3	N/A	**

Data taken from Motley Fool CAPS on 07/15/2008.

CAPS player bzhayes notes that Nokia is a "tech stock with a p/e under 10 and dividend over 3%.... great time to buy." Other bullish players like the company for its strong balance sheet, massive global footprint, and again for the ridiculously low share price.

The bears feel pressure from Apple's iPhone, and MARALB83 doesn't see "a clear alternative" to that gizmo in Nokia's lineup.

What management does:
Let's see here. The original iPhone was introduced in June 2007. Since then, Nokia has expanded its gross margin, revenue, and profits in an impressive show of market muscle. If the iPhone were really squeezing Nokia's pricing policies, at least the gross take would suffer.

Margins	12/2006	3/2007	6/2007	9/2007	12/2007	3/2008
Gross	32.5%	32.4%	31.9%	32.7%	34.5%	35.1%
Operating	13.0%	12.7%	13.9%	14.7%	13.9%	13.7%
Net	10.5%	10.2%	13.4%	14.1%	14.1%	13.8%
FCF/Revenue	9.3%	10.9%	11.6%	12.9%	14.0%	11.6%

Growth (YOY)	12/2006	3/2007	6/2007	9/2007	12/2007	3/2008
Revenue	20.3%	14.2%	16.3%	18.3%	24.2%	29.9%
Earnings	19.1%	11.5%	43.0%	61.8%	67.3%	75.8%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
The bottom line is that Nokia goes after a much broader audience than Apple's entertainment-centric iPhone or the all-business, no-fun BlackBerry. The Finnish product line covers all bases and reaches pretty much every market on this little globe of ours. Until every first-time cell phone owner in Ulan Bator and Ouagadougou needs a touch-screen smartphone that plays videos and connects to Oracle (Nasdaq: ORCL) databases, Nokia does not need to panic over the rise of the iPhone and friends. And by then, I'm betting that there will be a suitable Nokia model to fill that need. Maybe even 10.

I have to agree with the CAPS players who see incredible value in this beaten-down tech giant. The shares slid around 30% lower over the last six months, far worse than the S&P 500 benchmark's roughly 12% loss. Someone out there is overreacting to the competition's shiny new gadgets, and you could make a mint on their mistakes.

Copyright © 2008 Universal Press Syndicate.