(NOK) Nokia Reverts Back to MeeGo

When the whole world was waiting eagerly for Nokia’s Windows Phone 7-based smartphones, Nokia Corporation (NOK), the world’s largest mobile phone maker again stuns everyone by unveiling a new smartphone, N9. The new device will be powered by the Linux-based MeeGo software, which is based on open source mobile operating platform and is jointly developed by Nokia and Intel Corporation (INTL). The newly launched unsubsidized mobile device is priced at $670 for 16GB handsets and $760 for 64GB handsets.

Earlier, Nokia took a historic decision to adopt Windows Phone 7 software for all its forthcoming smartphones, thereby sidelining its own less user-friendly operating system Symbian and the much-hyped Linux-based MeeGo software. But the company surprised everyone by reverting back to the MeeGo operating system, thereby creating a lot of doubts in investor’s mind.

Earlier in April, Nokia launched two Symbian-based smartphone handsets, E6 and X7. So it is to be seen how Nokia deals with its existing operating when Windows 7-based smartphones will be launched.

Nokia faces stiff competition from Google Inc’s (GOOG) Android-based smartphones and Apple Inc’s (AAPL) iPhones. Moreover, with the growing popularity of tablets, which Nokia lacks in its product portfolio, will hurt profitability going forward. So, we believe that the newly launched smartphone N9 with 16GB to 64GB capacity will offer some resistance against such cut-throat competition.

Further, we expect Nokia to gradually lose market share since we do not find any product in Nokia’s existing portfolio, which is unique in the market.

However, we believe that the recent lawsuit settlement with Apple coupled with Windows Phone 7 based smartphones launch and low-end product launch will improve Nokia’s outlook going forward.

We, thus, maintain our long-term Neutral recommendation for Nokia. Currently, Nokia has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

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