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Dear Friends,

I think that the Rule Maker Portfolio would really be enriched by adding Nokia (NOK) to it. I have crunched the numbers and find it an excellent stock for the portfolio. Is there going to be a vote for a new stock to be added any time soon? Just look at the results of their earnings today and you see what I am talking about. It is truely a monopoly and will be an amazing gainer for any portfolio that includes it.

It is the second largest holding after KO in my portfolio.

MYCROFT
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Has anyone ever seen a more perfect quarterly report in their lives. I have been in the market for 25 years and I have never seen such percentage gains in my life.
I say Nokia deserves to be a Rule Maker.

http://www.nokia.com/investor/1999/1Q/index.html

Enjoy

MYCROFT
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MYCROFT writes:

I think that the Rule Maker Portfolio would really be enriched by adding Nokia (NOK) to it. I have crunched the numbers and find it an excellent stock for the portfolio. Is there going to be a vote for a new stock to be added any time soon? Just look at the results of their earnings today and you see what I am talking about. It is truely a monopoly and will be an amazing gainer for any portfolio that includes it.

Why do you think NOKIA's leadership position is clearly sustainable?

-- e.g., in '97 NOKIA had @ 20% of the cellular phone market, while Ericsson had @ 40%. Although the current situation has those percentages reversed, who's to say that Ericsson (or Motorola) won't come out with competitive products?


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<Why do you think NOKIA's leadership position is clearly sustainable?>

Nokia is a company with a superior management that is following Coca-Cola's theory of Unit Volume. While others are making phones that may do just a little bit fancier things then Nokia, they are not pricing them for the masses. Nokia is interested in selling huge volumes of phones and then selling accessories to those phones. They are trying to get people to think of Wireless Phones as something that they need and not just something that they want. They are experts in marketing and want to sell people not just one phone but hope to sell them two or three with different colors , and come out with promotions to create a collectors market for the product similiar to what Mattel does with Barbie.

http://biz.yahoo.com/bw/990429/nokia_1.html

Management though are experts in cost controls and squeeze profits from every possible angle that they try to implement. Also I feel that Nokia is misunderstood by most of the investing community because it is an ADR and financial reports are not available. Nokia is trying to change that by trying to equate the shares that trade here with the ones that trade in Finland. 1 ADR = 1 Euro share. The reason that I say that Nokia is misunderstood can be shown in the following post;

http://boards.fool.com/Registered/Message.asp?id=1190244000133000&sort=postdate

It also cleans the competition in the quality of its earnings which is shown by this post;

http://boards.fool.com/Registered/Message.asp?id=1030043000766001&sort=postdate

Add tremendous growth in earnings, sales , Owners Earnings and terrific management and then you add terrible management for its competitors who over charge for their phones and you have a real winner here . Sony the most powerful company in Japan had sales of its Wireless phones fall dramatically this last year because Nokia just crucified them in Japan. China is becoming our biggest market. It amazes me that I can not find one thing wrong with this company anywhere. No mistakes=Big profits. When we can kick Motorolas butt in the USA, Sonys butt in Japan and Ericssons in Europe , year in and year out then I am looking at a killer company.

MYCROFT
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Nokia's Advantage Over Ericsson Grows as Competition Heats Up
By Jonas Dromberg April 1999

Nokia Oyj, the world's largest cellular phone maker, boosted first-quarter profit with hipper, smaller and more affordable phones, while Ericsson AB earnings dropped as it struggled to keep up.

The Finnish company's first-quarter profit rose 50% to $536 million, while profit at Sweden's Ericsson, the No. 3 phone maker, halved to $108 million, the companies reported today. Nokia shares rose as much as 11%, while Ericsson dropped as much as 7.8%.

Ericsson "needs to establish a new product platform that will allow it to churn out lots of phones at a low cost," said Anders Jarheim, who manages Scandinavian equities at Oehman Fonder in Stockholm. "Nokia is doing everything right - it's got the right phones, the right production method and it all works."

Phones with trendy colors and features helped Nokia dethrone Motorola Inc. of the U.S. as world leader last year. Ericsson has lagged its bigger rivals in targeting younger non- professional cellular phone users. Production delays also eroded Ericsson's market shares.

Nokia, which has introduced a number of new phones, notably its big-selling 5100 series, saw phone sales surge 92%, while Ericsson sales fell 12%.

Still, Ericsson aims to regain market share with a new low- cost A1018 series, to be released mid-year. Nokia, in turn, plans to release another new low-cost phone, the 3210 series, this quarter, making it difficult for Ericsson to grab back market shares, analyst said.

"While competitors have complained about price erosion Nokia is getting successively better pricing for its new products," said Michael Schroeder, an analyst at Opstock Securities, who rates the stock a "buy."

Investors have also been attracted to Nokia for its ability to keep cost-efficiency in setting up production for new phones. Although Nokia last year introduced a slew of new phones, it succeeded in keeping start-up costs under control.

Ericsson blamed costs related to introducing production lines for its new phones attributed. The companies didn't report specific start-up costs figures.

Nokia said about 40% of global phone sales now comes from the so-called upgrade market as subscribers buy new phones to replace their old phones as network operators introduce new functions with which their old phones aren't compatible.

At the same time, Ericsson's sales growth is being harnessed by its bigger focus on phone networks, for which demand isn't growing as fast as the phone market.

The network unit at Ericsson saw sales rise 20%, while Nokia's saw sales rise 25%. Ericsson has also been hit by its focus on the traditional network business, which has experienced slower growth as customers are swapping their traditional phone subscriptions for cellular subscriptions.

Nokia expects there will be one billion cellular phone subscribers in the world by the year 2003, two years earlier than its previous estimate, backing up its strategy on focusing on cellular telephones and networks, and not networks for tradition phone services.

Nokia has seen strong demand after it released a range of new phones last year, notably the 5100 series which hit the shelves in the second quarter last year. While Nokia hasn't released any significant new phones since then, it will ship the new low-end 3210 series this quarter.

Ericsson, in addition to the A1018, plans to introduce the high-end T28 phone in the second half. While analyst say the T28 isn't expected to be a big seller, its stripped down version, the T18, could help Ericsson grabbing market shares.

The Swedish company said that will help its phone sales to rise in the second half.

Ericsson's problems coincides with Sven-Christer Nilsson becoming new chief executive officer last year after charismatic leader Lars Ramqvist decided to join the board as a chairman.

Nokia faced similar difficulties earlier this year when chairman Casimir Ehrnrooth decided to retire after seven years. At Nokia, analysts say that process has strengthened the company as Jorma Ollila was named chairman, while retaining his position as CEO.


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Interesting post on NOK yahoo board;

Nokia's success -business point of view
by: tyiu_48 5193 of 5194
Again, I don't know the tech side.

But Nokia is a success company w/ the following features:

1. Able increase in sales, while substantially increasing the
profit margin.

2. Products being accepted in 2 major regions in the world.
US and China.

3. Successful marketing allow its products to penetrate US
and China's market. Cosider the consumers in US and China have different "taste".

4. Give what the users want: Ease of use. Most users don't need the extra but complicated features in a mobile phone.
5. Partnership with major wireless service providers.

6. Keep on rolling out newer models, while consumers choose
the new models repeatedly.

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An Analysts View;

Christoph Bruns is placing his bets on Nokia Corp. during this round.

"Nokia phones are a consumer good with a strong brand name and the best market penetration in the business," says Mr. Bruns, head of equity fund management of Union Investment GmbH in Frankfurt.

The company reaffirmed that status last week after reporting first-quarter pretax profit nearly doubled to 758 million euros, topping analysts' expectations. Its popular mobile phones have made life tough for rivals such as Telefon AB L.M. Ericsson, which posted a 51% plunge in first-quarter profit the same day.

Shares in Nokia jumped 10% that day and have more than doubled over the past six months. But Mr. Bruns says the stock still has plenty of momentum behind it.

"Nokia can keep going the way it has for probably the next three years selling mobile phones," he said. "We're looking at at least 25% annual growth -- and that's a conservative estimate."

Mr. Bruns says he also is confident Nokia, primarily a mobile-phone producer, is poised to become a bigger participant in other telecommunciations equipment, as Ericsson already is. Nokia has said it intends to become a large player in the new data-networking market. It already has increased its budget for research and development and expanded its Internet Protocal expertise with a handful of small acquisitions.

And with Nokia shares trading about 35 times above earnings, Mr. Bruns insists it's still a great deal. The stock, which on Wednesday fell 4.2%, or 3.10 euros, at 71.40 euros, will probably rise to 90 euros in six months, he says.
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All of this narrative is good, but what are the numbers? Has anyone run them on RM screen? I'm not disagreeing, as I also own the stock, but I'd like to see the analysis, especially against the competition.

Thanks Bill
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Cellular is on the cusp of becoming like the TV industry. As the technology becomes easier to manufacture, everyone jumps on board and the big names start to suffer as they compete against manufacturers located in places with very, very cheap engineers and labor.

Consider that Rockwell sells a complete chipset for a GSM cellphone that costs $50. These weren't available two years ago, and thus those that knew how to make cellphones and could afford the capitol investment flourished. Next year and beyond, we'll see hundreds of small companies take Rockwell (and ADI, and TI, and VLSI's) publicly available chipsets and software and make phones. Suddenly, life sucks for Nokia, Motorola and Ericsson, because their hard-won skills are available to anyone for next to nothing. Even worse, the leisurely pace of "squirt out a new phone every 18 months" will disolve as the cellular biz moves to Asian-time and new models are rolled out twice a year by 10 competititors. Suddenly, consumers find 20 new models a year to select from. Contrast this to the 3.5 year old StarTAC, 3 year old Nokia 61xx and QPhone.

Look at the cellular market in Japan for a hint of what's coming--they lead the world in cellular trends. There, Motorola, Nokia and Ericsson have market share in the low single digits. The largest manufacturer has a share in the teens. Most are loosing money. It is an absolute bloodbath. It will happen everywhere else, too.

Cellphone == Color TV == CD Player == VCR

Don't kid yourself into thinking there's something special about these machines.
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All of this narrative is good, but what are the numbers? Has anyone run them on RM screen? I'm not disagreeing, as I also own the stock, but I'd like to see the analysis, especially against the competition.


billjohn,

You are in luck! We have had two separate comparisons done with Nokia against Qualcomm, Motorola, and Ericsson in the past week or so. I did one using the quarterly numbers, and it can be found at the following link:

http://boards.fool.com/registered/Message.asp?id=1030043000771000&sort=postdate

TMFGrape just posted an analysis using the results from the past 12 months, and it can be found at the following link:

http://boards.fool.com/registered/Message.asp?id=1030043000786000&sort=postdate

These two posts should satisfy your appetite for "numbers", while confirming that your investment in NOK is a good one. This is definitely a stock that I myself am keeping an eye on.

Fool On!

the LanceMan
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Great Post on Nokia teaming up with KO in Vending machines!!!!!!!

http://boards.fool.com/Registered/Message.asp?id=1190244000145000&sort=postdate

MYCROFT
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Cellular is on the cusp of becoming like the TV industry. As the technology becomes easier to
manufacture, everyone jumps on board and the big names start to suffer as they compete against
manufacturers located in places with very, very cheap engineers and labor.


NoiseFloor,

Very good post. I have the same fears as you regarding Nokia. However, those same fears kept me out of Dell. I'm still on the fence, but this is one that I am very interested in. The fear that you mentioned is the only thing holding me back from making a purchase right now. If I can convince myself that Nokia is a Merchant King like Dell this will make a big difference.

Domer
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Cellular is on the cusp of becoming like the TV industry. As the technology becomes easier to
manufacture, everyone jumps on board and the big names start to suffer as they compete against
manufacturers located in places with very, very cheap engineers and labor.

Consider that Rockwell sells a complete chipset for a GSM cellphone that costs $50. These
weren't available two years ago, and thus those that knew how to make cellphones and could
afford the capitol investment flourished. Next year and beyond, we'll see hundreds of small
companies take Rockwell (and ADI, and TI, and VLSI's) publicly available chipsets and software
and make phones.


I beg to differ here.

1) Nokia already manufactures in low cost parts of the world (Malaysia and China as I recall)
2) Can you say the words "features" and "user interface"? At the higher end of the market Nokia phones absolutely rock because of their UI (especially their Far east language support) and announced features (WAP etc).
2a) One feature that people tend to ignore is the battery life. Nokia phones do (in my experience) just last much longer between recharges and believe me low power consumption is not something that you can buy from rockwell as a chipset.
3) the ability to make a phone does not translate into the ability to sell one. Consider the venerable KO. Anyone can make a soft drink all you need is some Co2, some water, some sweetner and a little flavouring but KO still has some 50% of the market place for fizzy drinks in the world (see the economist last week). Nokia has great relationships with the channel that most people buy (rent/lease) their phone from - that is the cellular providers themselves - and they give enough margin to the resellers that the salesmen prefer to sell Nokia. This is excluding all the brand building Nokia is doing recently (product placements in movies, sponsorship etc etc).

Even worse, the leisurely pace of "squirt out a
new phone every 18 months" will disolve as the cellular biz moves to Asian-time and new models
are rolled out twice a year by 10 competititors. Suddenly, consumers find 20 new models a year to
select from. Contrast this to the 3.5 year old StarTAC, 3 year old Nokia 61xx and QPhone

I think you missed something - Nokia is now in a sub 1 year product cycle time frame. Take a look at some of the comments by Tero Kuittinen at http://www.debry.com/index.htm


Dirty Dingus
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Domer,

I would share those fears if it weren't for the fact that Nokia is well the way to transforming cell phones into wireless Internet access devices. Although this increases the number of potential competitors, it also increases the number of potential customers. (For example, even though I'm a Nokia shareholder, I doubt if I'll ever buy a Nokia cell phone, because I have no need for one. However, I can easily see myself buying a Nokia Internet access device.) Additionally, it should stave off commoditization for a while.

For more information, you might want to take a look at the Q1 conference call transcript <http://www.nokia.com/investor/1999/1Q/review.html> where the president of the mobile phones division describes plans for Mobile Media Mode (and WAP-enabled devices). Here's an excerpt:

In our vision, the Internet will go mobile, just as voice communication has.

One of the key enablers of Mobile Internet is the Wireless Application Protocol or WAP. WAP enables Internet content to be distributed to and displayed in standard mobile phones.

Our strong belief and trust in the success of WAP is based on the fact that it brings benefits to all parties within the value chain: it's a winning game for consumers, content providers, operators and terminal manufacturers alike.


ciao,
umberto
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