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What I find missing from a strict valuation estimate of Nokia is the enormous growth potential of smart and feature phones in the developing markets. Nokia has very strong brand recognition and loyalty in the world outside the US. Time will tell if they can capitalize on it.

I know that aspect is missing from my valuation analysis, but it's missing because I think it's at least hard to do (too many variables) and because from an investor's point of view it is not necessary to analyse the upside.

There were 227M smartphones shipped in 4Q/2012. Windows Phone had just 2,6% of the market (of which Nokia sold an estimated 85%). If Nokia were to grab 6% of smartphone market, it would be 13,6M phones per quarter (assuming shipment levels of last christmas quarter). That would be 55 M units per year.

I think that is realistic as they have introduced lower priced Lumias recently. If their average selling price would drop to 200 EUR per smartphone and their profit margin would be 5% per phone they would be making 0,5B EUR profit per year. Value for their Lumia business would then be 5-8B EUR.

This valuation changes if smartphone market size, average Lumia selling price, Lumia market share or profit margin changes. Future is therefore very uncertain, but current market valuation doesn't assume any value from their smartphone division.
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