was higher before the open Monday despite being cut to neutral from buy at Schwab SoundView, which argued that the company is losing some of its competitive advantage in the cell-phone market.
The brokerage cited what it said is Nokia's inability to raise its stake in high-end GSM handsets and a recent loss of market share in CDMA cell phones for its skepticism, saying a recent reorganization has been a "distraction." It cut the price target to $21 from $28.
"While we have written often over the past several quarters about our issues with Nokia's weak handset lineup, the company has been able to use pricing and marketing as weapons to keep its share relatively constant in a strong market," Schwab SoundView wrote. "Our decision to downgrade is largely due to our checks that show, for the first time in many years, substantial price moves by Nokia on flagship GSM products do not seem to have resulted in market share increases."
The brokerage said it expects the first-quarter worldwide handset market to exceed its old estimate of 137 million units, but said it wasn't changing its estimate for the second quarter, which is currently "flat to up slightly" over the first quarter. It cited early reports of a channel buildup in Europe.
"Given the company's dominant market positions in handsets, our thesis on Nokia was that it was a play on the handset market strength of 2003 and the first quarter of 2004," Schwab wrote. "The company's stock increased almost 50% from February 2003 levels as Nokia rode the market wave. However, given our view that 2004 will be a good year for handsets, and not a spectacular one like 2003 was, we prefer to own companies that are gaining market share, most notably
, over market plays like Nokia."
Nokia shares were recently up 62 cents, or 3.2%, to $20.18 on the Instinet premarket session on a day
The Wall Street Journal
highlighted its recent success with camera phones.
An affiliate of Schwab SoundView makes a market in Nokia and Motorola.