JBL: Dialing Up Nokia

Nokia made a bad strategic decision to not go with the clamshell cell-phone design and stay with the candy bar design. Motorola took advantage of this strategic error and took market share. Motorola came out with one of the first "must have" items of the 2004 Christmas season with the new Razr phone.

Nokia is still the market leader though, and doesn't plan on losing its position anytime soon. Nokia has rapidly caught up to the consumer.

I believe both companies are good plays on the cell-phone market. They both have around $13 billion in cash. However, Nokia has virtually no debt while Motorola has around $5 billion in debt.

Nokia has a pristine balance sheet and about $3 a share in cash. Nokia also has about 55% of its business in the fast growing markets of Europe, Middle East and Africa. They have been almost untouchable there as the market leader.

Nokia has been great at getting into markets with cheap, reliable phones and later educating consumers to the higher margin phones. Nokia trades at a forward price-to-earnings multiple of around 17, with an estimated growth rate of just over 10%. Nokia yields around 2.4%.

Economies of size have caught up to these companies and neither is considered a growth story anymore. I believe Nokia is a better buy than Motorola, and a great core holding and solid long-term investment. Nokia is a company that is going to make a lot of money for many, many years.

With a company that has almost no debt, tons of cash and is still the market leader, you can't go wrong with this Christmas gift.

True Bargain Under the Tree

My last article talked about American Express' upside potential. The key to my optimism is found in the opportunities in the credit card business that it's previously been shut out of by Master Card and Visa.