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Motorola's Loss, Nokia's Gain!

After Motorola (MOT) threw in the towel on making money in cell phones this year, is it a good buy?

It was not three years ago. This analysis is still valid today.

In fact, Motorola’s failure is a big positive for Nokia (NOK) on many fronts: it shows that Nokia’s management can execute despite not having the “hottest” phone on the market.

Also, it will be further taking market share from Motorola: I estimate its margins will further improve, driving its earnings north of $2 a share over next couple years. The best part is it doesn’t have to do anything heroic to achieve that. Operational leverage (i.e. higher volumes spread over fixed costs) and a shift to a higher margin (i.e. more feature-rich phones) will do the work. I am not as enthusiastic about the stock as I was a year or two ago, but I still see some room for growth.

Disclosure: I own Nokia stock

Vitaliy Katsenelson

I am the CEO at IMA, which is anything but your average investment firm. (Why? Get our company brochure here, or simply visit our website).

In a brief moment of senility, Forbes magazine called me “the new Benjamin Graham.”

I’ve written two books on investing, which were published by John Wiley & Sons and have been translated into eight languages. (I’m working on a third - you can read a chapter from it, titled “The 6 Commandments of Value Investing” here).

And if you prefer listening, audio versions of my articles are published weekly at investor.fm.

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