Over the course of 2011, investors steadily unloaded their holdings in
Research in Motion (Nasdaq: RIMM) as it became apparent that the maker of Blackberry phones couldn't keep up with the tag-team onslaught of
Apple (Nasdaq: AAPL) and
Google (Nasdaq: GOOG), which now collectively control more than 75% of the global smartphone
market.
Perhaps an even greater victim of the Apple/Google juggernaut has been Nokia (NYSE: NOK), which should have been an important player in the smartphone market.
About two months ago, I suggested that the Finland-based company was headed for trouble.
Shares of Nokia remain stuck below $6 and a very high short-selling interest implies more trouble ahead. The recent short position stood at 148 million shares, equating to six days' worth of trading volume and the second-largest short position on the New York Stock Exchange (after Bank of America (NYSE: BAC)).
But I'm now seeing this stock in a different light. Though it's a bit too soon for Nokia to declare victory, the last few months have altered the investment thesis. Shares are likely to hold their own in 2012 -- or stage a powerful rebound.
Here's why...
A desperate gambit pays off
Like Research in Motion and Hewlett-Packard (NYSE: HPQ), Nokia found that its operating system (known as Symbian) simply couldn't keep up with the outstanding software and marketing muscle that Apple and Google developed. Management realized it was too late in the game to truly resuscitate Symbian, so it decided to cast its lot with Microsoft (Nasdaq: MSFT), which was readying a new mobile software platform, known as Windows 7.
A few months ago, I suggested that Microsoft's efforts to crack the mobile software market had repeatedly failed, and this time would be no different.