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Nokia's Still in a Death Spiral

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There seems to be an extra "pep in the step" of beleaguered phone giant Nokia (NOK). Although Nokia investors speak with glowing confidence following Nokia's first-quarter earnings report, investors are too quickly to forget that the stock is actually down 13% on the year.

Besides, first-quarter earnings, although slightly improved, still revealed significant underlying problems with this company. And I'm not certain that aggressive cost-cutting, which management has been applying, is the solution.

If Nokia investors have anything to be excited about, it's that the stock has already reached bottom. Nevertheless, there were no signs that this company is ready to compete against Apple (AAPL) and Google's (GOOG) Android dominance for the smartphone market. And unfortunately, it no longer appears as if Nokia's relationship with Microsoft (MSFT) will ever amount to much of what it was billed to be.

In fact, given that Nokia just posted 20% decline in revenue, due (in part) to weak Windows Mobile adoption, I think it's time for the company to consider a different mobile strategy. I appreciate that severing ties with Microsoft is not as easy as it sounds. But investors should nonetheless demand some sort of latitude from management, especially since Nokia's Lumia platform, which is still performing well, is being sucked in to a 32% decline in the devices business.

The company did make up for some of deficits by improving profitability. However, this was more of a result of cost-cutting as opposed to better revenue and margins. In Nokia's current state, the unimpressive top line offers very little to get excited about. Nokia investors have to be pleased that Nokia's situation has improved from where things were a couple of years ago.

However, the fact that the company has now fallen behind BlackBerry (BBRY), which had essentially died, demonstrates how far Nokia still has to go to garner respect. And it's time that investors ask themselves does Nokia have the management wherewithal to turn a profit. While cutting costs will help, growing inventories won't.

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Stock Tickers: NOK AAPL GOOG MSFT BBRY Author Disclosure: At the time of publication Richard held shares of Apple.
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