Stock Trading

Steve Ballmer Willing To Pay $230 Per Phone To Beat Apple, Google

The question investors, technologists and strategists have long been asking is, “What is Steve Ballmer willing to pay to beat Apple and Google?” Now we have a small part of the answer, $230 per cell phone.

Microsoft (MSFT) is in a venture with Nokia (NOK) to gain market share for Windows phones in its battle with Google Android.

In the last quarter, Microsoft paid $250 million to Nokia. Nokia claims to have shipped 1 million Windows phones. It is not known how many of these phones are still sitting in inventory and how many were actually bought by consumers. In any case, it amounts to Microsoft paying Nokia $250 per phone.

As part of the agreement between the two companies, Nokia pays a license fee to Microsoft for each phone it sells. The exact details of the license fee are not known, but my estimate is that it is around $20 per phone. Several sources have reported that Microsoft charges between $20 and $30 license fee per phone.

Since the agreement between Microsoft and Nokia is designed for large volume production, the inference is that license fee from Nokia to Microsoft is at the low- end. So here you have it, Microsoft paid $250 to receive about $20.

It appears that a large number of phones that Nokia shipped were Lumia 700 series. You can typically buy these phones for about $50 with a contract. The Lumia 710 that a consumer bought for $50 cost Microsoft $230; it’s ironic for a company that once was the king of software.

The $230 number shows desperation, and there is no doubt that the Windows phone will live or die based on how well Nokia does. How does Microsoft justify taking such a loss? With about $50 billion in cash, $250 million is peanuts for Microsoft. Microsoft simply fell behind Apple and Google, and Ballmer recognizes that a big price has to be paid to catch up.

A key test is coming in the near future. For background, please see my article “Microsoft Ready To Wage War Against Apple, Google With Nokia Lumia.”

Lumia 900 is a high end phone from Nokia. The phone received glowing reviews at CES in Las Vegas.

The shocker is that AT&T (T) may price the phone at $99 with a two-year contract. The low price is a game changer. At present, comparable phones from Apple and Samsung are priced at $199 with a two year contract.

Only time will tell if Nokia Lumia 900 will receive consumer acceptance commensurate with rave reviews. One thing is for certain, introducing Lumia 900 at such a low price is like stomping on the downtrodden RIM (RIMM).

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FYI when I post I do not link charts as you and I have diff settings and we both know charts can turn on a moments notice.
Please do your own DD as I can only be held responsible if/when you make $$$$$$!

Nokia to Cut 4,000 Jobs at 3 FactoriesBy KEVIN J. O'BRIEN
Published: February 8, 2012


BERLIN — Nokia, the biggest maker of cellphones by volume, said Wednesday that it would cut 4,000 manufacturing jobs, or 7 percent of its global workforce, as it moved to streamline and save money from its production of smartphones.

The company said the cuts would be made at three Nokia factories — in Komarom, Hungary; Reynosa, Mexico; and Salo, Finland — as it transferred the assembly of smartphones to factories in Asia, which are closer to component makers.

“Shifting device assembly to Asia is targeted at improving our time to market,” said Niklas Savander, the Nokia executive vice president responsible for smart phones. “By working more closely with our suppliers, we believe that we will be able to introduce innovations into the market more quickly and ultimately be more competitive.”

Nokia, based in Espoo, Finland, said it planned to cut 2,300 of 4,400 jobs at its Hungarian factory, 700 of 1,000 in Mexico and 1,000 of 1,700 in Salo, its largest production facility in Finland.

The job reductions come as Nokia is struggling financially during the transition from its Symbian-based smartphone lineup to Lumia Windows phones with Microsoft. Nokia last month said it lost €1.1, or $1.4 billion, in the fourth quarter, with its sales declining 21 percent from a year earlier, as operators abandoned or demanded price cuts on Symbian models.

The factories affected by the job cuts will refocus on customizing Nokia smartphones for Europe and North America. Nokia’s smartphone lineup includes Lumia Windows phones with Microsoft, MeeGo from an alliance with chip maker Intel, and Symbian.

Last September, the Nokia chief executive, Stephen Elop, said the company would start a comprehensive review of its smartphone production facilities with an eye to reducing costs and making long-term improvements in efficiency.

Nokia’s smartphone factories in Masan, South Korea, and Beijing will take over the assembly of smartphones, said James Etheridge, a Nokia spokesman in Espoo. The factories in Hungary, Mexico and Finland will add software and local-language applications.

The reductions are the second wave of job cuts at Nokia under Mr. Elop, a former Microsoft executive. In April 2011 Nokia said it would eliminate 4,000 jobs in Britain, Denmark and Finland, and transfer 3,000 employees in Symbian software development to Accenture, a technology consultant.

Nokia employed 57,000 employees at the end of 2011, excluding workers in the Nokia Siemens Network venture, where Nokia owns a 50-percent stake. Nokia said it planned to eliminate the latest round of factory jobs by the end of this year.

Shares of Nokia were up 0.4 percent at €3.90 in Helsinki trading.

Michael Schroder, an analyst at FIM Securities in Helsinki, said the latest job cuts announced by Nokia were largely in line with what the company had suggested in September when announcing the review of its manufacturing operations.

Whether Nokia will be forced to cut more jobs depends in large part, Mr. Schroder said, on how precipitously Nokia’s old Symbian lineup declines. When Nokia began its collaboration with Microsoft in February 2011, the Finnish company said it expected to sell 150 million Symbian models during the transition to the Windows.

But last month, Mr. Elop abandoned that sales goal, saying the declines to Symbian sales were more rapid than anticipated.

“Nokia has quite ambitious cost-savings targets, but I think this is probably the bulk of the cuts,” Mr. Schroder said. “That all really depends on Symbian, where we expect volumes to decrease again for at least the next two quarters.”

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FYI when I post I do not link charts as you and I have diff settings and we both know charts can turn on a moments notice.
Please do your own DD as I can only be held responsible if/when you make $$$$$$!

Will Microsoft Continue To Drive Through Its 52-Week High? by: Benjamin Goldman February 24, 2012 | about: MSFT, includes: AAPL

Many analysts over the past few months have predicted a bullish run for Microsoft (MSFT), and the stock is now up 26.9% in the last six months. In the past decade, however, the stock has been a roller coaster ride and shares have been relatively flat over this time. Now it's time to determine if Microsoft shares will revert back to their usual $25 to $30 range, or if shares will break into the $40 area as Microsoft can potentially enter a new golden age.

Microsoft has a very simple business structure for a company with a $260 billion market cap. Its cash cows are Windows and Office and its growth is expected to come from its investment in the cloud, Skype, which was bought at a bargain, and its search engine Bing, as it continues to develop. Microsoft has a few other business segments including its gaming division and business services, which may also add significant value to Microsoft in the future. The company continues to try to implement Windows Phone, but I believe that this segment will eventually fizzle out and should have very little affect on Microsoft's stock price.

Despite Microsoft's recent bull run, it still appears to be a good value buy. Microsoft has a one year forward P/E ratio of 10.85 and is expected to still have double-digit EPS growth in the next couple of years. In addition, Microsoft appears to have about $40 billion after netting out its $11.9 billion in total debt from its $59.3 billion in cash and investments and leaving some cash for operating activities. After taking this out of Microsoft's market cap, the company has an incredibly low 9.20 forward P/E.

Microsoft's stock pricing and business structure looks a lot like Apple (AAPL) a year ago. The company has a handful of cash cow products along with some products with tons of growth potential. The company's huge market cap makes it appear like a bubble stock at first, but when looking at the strong financials and future potential to increase revenue and earnings, it becomes an apparent value stock.

There is still some time to hop on the Microsoft bandwagon. I believe that Microsoft shares can be worth $37.50 within the next year, which would be a 19.8% return for investors.

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FYI when I post I do not link charts as you and I have diff settings and we both know charts can turn on a moments notice.
Please do your own DD as I can only be held responsible if/when you make $$$$$$!

8:58 AM Nokia (NOK) exec Niklas Savander sounds off at the Mobile World Congress in Barcelona, saying the Finnish company will try to price Windows phones at $100 amid intense competition from Chinese manufacturers offering Android-powered phones. He also notes that sales for Symbian devices in China, India, the Middle East, and Africa are holding up well as the company skimps on more advanced features with consumers demanding less in those markets.

__________________
FYI when I post I do not link charts as you and I have diff settings and we both know charts can turn on a moments notice.
Please do your own DD as I can only be held responsible if/when you make $$$$$$!