The Little Engine That Can't

NEW YORK ( TheStreet) --The more that I try to like the prospects of smartphone maker Nokia ( NOK), the more I'm reminded by Apple's ( AAPL) hunger to dominate the smartphone market how grossly misguided, if not foolish are those prospects.

With Apple having released its highly anticipated iPhone 5 to rave reviews, beleaguered rivals including Research in Motion ( RIMM) and Nokia face longer odds to succeed than ever before.

As poorly as Nokia has performed over the past couple of years, its issues have been compounded by the fact that neither Apple nor Samsung have made enough mistakes to give Nokia an opening, or even a glimmer of hope. Though Samsung has lost its copyright infringement case against Apple, it does not present enough of an opening for Nokia to capitalize -- at least not to the extent that it benefits Microsoft ( MSFT).

The biggest anomaly when assessing Nokia is that here's a market leader in a fast-growing smartphone industry that is grossly irrelevant at the same time. The company has lost close to 80% of its value during the course of the past five years. Dating back to 2007, the company at one point enjoyed almost 50% of the global smartphone revenue. Today, as it is fighting for its life it is still burning through cash like nobody's business.

What's more, the competition that exists within the smartphone space is just too much to overcome -- particularly when considering that Amazon ( AMZN) has been rumored to want to enter the phone market. And now here comes Hewlett-Packard ( HPQ) with its recent announcement.

What this means is that Nokia's cruise control towards irrelevance seems poised to continue absent some significant developments in its hardware and software platforms. Does it have the means do come up with a great product?

Perhaps, but I don't think anyone believes Nokia has the know-how to develop something "game-changing" enough to disrupt Apple or Samsung. For that matter, it still lacks the enterprise advantage of RIM. But I don't think this should be its focus either.

Make no mistake: Nokia is never going to scare RIM, much less Apple or Samsung. But it needs to prove that it can at least win in the lower-end phone market. This will require producing phones that consumers will want and gaining enough market share from names such as HTC and LG.

If Nokia can follow Samsung's model of beating Apple on price, which has proven effective to propel it to #1 in overall sales, then Nokia has a decent shot at prolonging its inevitable demise. Its recent focus has been on the lower-end phone market. In that regard it is not faring all that well either as competition for China and India continues to eat away at its margins.

But the sad reality is, not only has it proven that it can't compete, it is running out of time.

At the time of publication, the author was long AAPL and held no position in any of the other stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Richard Saintvilus is a private investor with an information technology and engineering background and has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.