Nokia, anyone of you happen to still using it? This once omnipotent mobile phone company is currently in steep decline, with even threats of being knocked into obsolete.
Nokia Corporation is a Finnish communications corporation engaged in the manufacturing of mobile devices, with over 132,000 employees in 120 countries, and sales in more than 150 countries netting a global annual revenue of over 42 billion. It is Finland’s largest company, responsible for 3% of its GDP.
Since the introduction of its first portable phone in 1984, Nokia enjoyed exponential growth, and with the exploding worldwide popularity of mobile telephones in the 1990s, Nokia decided to divest all its non-telecommunication businesses and focus solely on the core operations. The company proceed to reorganize its logistics and production assembly, which was greatly responsible for its early day success.
Nokia’s HQ in Finland
In 1994, Nokia’s 2100 series catalyzed it into a multinational giant. The target was to sell 0.5 million units globally, but Nokia ended up with 20 million sold. Nokia was quick to improve and adjust to consumer’s needs and taste, introducing new features and phone models that constantly became a hit with consumers. By 1998 Nokia made it to be the world’s largest mobile phone company.
Nokia firmly established itself as industry leader when it captured 40% global mobile phone market share in 2002-2003. It was able to steadily maintain such market position till 2007.
Rivals gaining market shares at Nokia’s expense
The first sign of cracks appeared in 2006 when Motorola and RIM was able to wipe Nokia’s market share in North America. The introduction of Apple’s iPhone in 2007 was catastrophic for Nokia, its market share in North America dropped from 20% in 2006 to 5% in 2010.
The real biggest slap on Nokia however, was the release of Android operating system by Google in 2008. While rivals like HTC, LG, Samsung and RIM rushed to embrace Android, which is rapidly gaining momentum among consumers, Nokia stubbornly stick to its Symbian system, that eventually led to its decline.
From 2008 onwards, Asian mobile makers like Samsung, HTC, LG and Huawei were capitalizing on Nokia’s declining market share and the lagged abilities in Symbian smartphones.
Apple’s iPhone and Google’s Android, Nokia’s killers - the 2 culprits responsible for its downfall.
In China, local mobile phone makers like Huawei and ZTE were able to cut deep into Nokia’s Chinese market share.
In South Korea, Samsung seized up to 10-15% of Nokia’s Korean market share.
In Taiwan, Nokia’s market share fell to 25%, and was about to be overrun by Samsung, who has 22%. Samsung had announced it expects its share to rise to 30% by 2011.
In India, Nokia’s market share was halved, losing rapidly to local manufacturers like Micromax.
Nokia pulled out from Japan in 2008.
While Nokia is still strong in middle East and Africa, Apple and RIM have eroded 10% of its market share there.
Even in its long-held domain of Europe, Samsung, LG, Apple and RIM were able to knock Nokia’s market share from 49% down to 28%.
Nokia beaten badly in smartphones, the smartphone market is expected to soar 50% this year and Nokia just isn’t at it.
The last company to go into decline, fresh in the mind, was Yahoo!. Its shares had since fallen by 60%.
After continuously losing market share for 2 years and after reading this article earlier January this year (http://www.reuters.com/article/2011/01/ … 5P20110119), I was convinced that Nokia’s decline may be sealed.
Nokia’s shares was at $10.58 that time. As it is a big, respectable company so I only estimated a conservative 10-18% drop for the whole year - for a falling company… so I decided to buy in NOK100JAN1210 put options which at that time cost $1.19, at selling strike price of $10 and option expiry date at Jan 2012 with breakeven excise price $8.81, giving me one year time to see it drops for the year or I lost my entire investment upon expiration.
Beyond my expectation and to my delight, Nokia couldn’t hold it, its global market share continues to tumble, now heading down to 25%, the lowest in 14 years. (http://news.yahoo.com/s/afp/20110519/tc … oogleapple) What’s worst, Samsung has overtook Nokia in Western European market share, beginning to encroach Nokia’s traditional stronghold in Europe ([url=http://www.mobiletoday.co.uk/News/11462/Samsung_overtakes_nokia_in_Western_Europe.aspx]http://www.mobiletoday.co.uk/News/11462 … urope.aspx), since the date I hold the options, Nokia shares have fallen 39%
And so, how is the put options that I bought for $1.19 five months ago?
It now worth $3.50-3.60, in other word, my investment is multiplied by 298% in 5 months. But I do not wish to sell my options yet. The expiry date is Jan 2012 and there is 6 more months to go. If Nokia goes the path of Yahoo! then there is 20% more to drop, I will be happily looking forward that.
Now that you know Nokia is heading towards decline, surely you have an idea where to invest your money?
Nokia put option, each contract allows you to leverage 100 shares so the mark price in reality is to be timed by 100 when buy.