Friday, February 11, 2011

Nokia: Street Views Mixed On MSFT Deal; Boon Or Bane For RIM?

Following news this morning that Nokia (NOK) is, in fact, striking the much-rumored partnership with Microsoft (MSFT), moving to Windows Phone 7 for its handsets and ditching Nokia’s own software, there is a range of opinion on the matter: some are hopeful, some seem to think this is a disaster. Question seems to be time frame for the new handsets.

And will all of this help or hurt Research in Motion (RIMM), which has been gaining steadily in areas where Nokia has long dominated, such as Asia-Pacific? It certainly seems to leave Apple (AAPL) and Google (GOOG) only stronger.

Mark McKechnie, Gleacher & Co.: Reiterates a Neutral rating on Nokia shares, while arguing it’s all a “good move” for Nokia. The Microsoft “ecosystem” is “a step above Symbian/MeeGo as it includes Zune Media, Xbox 360 Games, and a massive base of exchange and Office users.” This is a big step for Microsoft in third place, but it is a ways behind Apple and Google. But with carriers and developers and shoppers moving away from Symbian, Nokia will have to move fast or else see its handset division descend into negative cash flow.

Abey Lamba, ISI Group: Thinks Apple “will remain the leader,” with Nokia’s move unlikely to slow Apple’s momentum. “Although the news is positive for the entire Windows eco-system, the key issues are timing of the launch and the number of applications available at launch time. The more time it takes for them to launch their product, the tougher it will be for them to compete against iOS and Android based devices.” Research in Motion may experience greater competition in emerging markets from a Nokia-Microsoft team, he writes, while HTC, which also makes Windows-based phones, will benefit from a larger Windows ecosystem.

Tero Kuittinen, MKM Partners: Reiterates a Neutral rating. “CEO Elop failed to meet high expectations for an effective new strategy, as we had expected, ending up with a clumsy mix of long-term Windows plans and fading support for Symbian and MeeGo,” he writes. That could be an opportunity for Research in Motion. Kuittinen expects that carriers may switch support (marketing and subsidies) from existing Nokia devices to RIM phones, as Elop’s remarks about Symbian were “disparaging.” Kuittinen recommends using any uptick in Nokia shares to sell. If Nokia doesn’t have Windows models by the fourth quarter of this year, “would cause profound problems for that quarter’s profitability.”

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