By Janet Tavakoli at the Huffington Post
Yesterday Nokia's management kicked the company in the stomach and then self-immolated. At the most important meeting in the history of the company, Nokia's management blew it.
Why was this meeting so important?
Nokia has become a classic investor's value trap. Theoretically it trades below book value, but that "book value," even with a valuable patent portfolio, is difficult to monetize. Meanwhile, it's burning cash. This is despite Nokia's selling around one million handsets per day in the lower end of the market. Its smartphones are a different story. Apple and Android have 85% of worldwide market share, and Nokia has other competitors beyond that.
Moreover, Foxconn's subsidiary, the one that manufacturers a good chunk of Nokia's (but not Apple's) products, reported a record loss for the first half of 2012. It's moving farther north in China to cut its costs. It's struggling.
Nokia's debt has been downgraded to junk after years of losing market share. It's in a competitive market wherein target customers often already have contracts with carriers and won't switch, if they'll switch at all, until their contracts are up, and Nokias competition is much more savvy at marketing their products. You can have the best product in the world, but it counts for nothing, if you don't sell it. Nokia developed great Windows 8 Lumia smartphones, and it needed to ROCK the presentation.
I made a speculative bet on Nokia when the stock got crushed a few weeks ago. If Nokia nailed its presentation, the company would have a shot at not just pulling out of its tailspin, but persuading investors it would provide a reasonable return. It would be icing on the cake if Microsoft announced an investment for debt relief, maybe even a merger.
But shortly after Nokia's management mounted the stage to deliver their inept presentations, I laughed out loud at myself, and I dumped the stock. Throughout the day other investors threw in the towel, and by the end of the day, the crazy-volatile penny stock was down 16%. It was as if someone had challenged Nokia's management to kill the company in one day with an anti-sell campaign.
Keep reading: Janet Tavakoli: Is Nokia's Management Insane?.
