Back in the 1990′s, this stock was a blue chip in the truest sense of the term. It consistently blew past analyst estimates and raised guidance for the future. Investors could count on it to innovate and remain a strong number one in its markets much like the Apple of today. However, the stock just hit a 52-week low after issuing a nasty earnings warning this week. The stock in question is Nokia (NOK).
Harsh Warning
NOkia hit a 13-year low after the company said its second-quarter sales and margins will be below expectations as smartphones crush its current product lineup. Management said that sales in its key unit will be “substantially below its previous range of 6.1 billion Euros to 6.6 billion Euros. Additionally operating margins will slide below its expected range of 6-9%.
Here is the summary from its CEO Stephen Elop:
“Certain competitive forces, particularly Android, are really gaining momentum in certain regions for example in China there is indication of some very substantial movement in the growth of market share for Android,” Elop said. “We need to be faster to the market as relates to pricing action, as to the likes of how we range our products.”
This is a stunning fall from grace by one of the best companies in the world. I remember the respect that Nokia garnered amongst investors several years ago, but this is the peril of being a technology king. One never knows where the next threat will come from, and if it is not correctly anticipated, your whole company could come crashing down.
Is It A Buy Now?
The natural question is where do we go from here? There will be a big temptation to bottom fish and pick a bottom based on valuation, but I think that would be a mistake. I believe that the company’s core products are obsolete and market share will continue to deteriorate. Discussing the P/E and other value-oriented ratios is useless as well because the earnings projections have little credibility at this point. The best thing to do with this stock is to avoid it and move on to greener pastures.
This Once Proud Stock Has Gone Down The Drain is an article from: 
