Investors Hung Up on Mobile
It is not every day that the number one mobile phone manufacturer does a deal with the number one software maker, only for Nokia’s shares to fall 15% on the news of its tie up with Microsoft. To coincide with the Mobile World Congress we will look at Nokia (HEL:NOK1V) (NYSE:NOK), Apple Inc (NASDAQ:AAPL), Telefon Ab L M Ericsson, Research in Motion (NASDAQ:RIMM) (TSE:RIM) and HTC Corp (TPE:2498).
The good news for all phone makers is that Smartphones are now outselling computers. The bad news is that this success is far from uniform. Nokia has managed to hold onto 39% of the global mobile phone market but the rise of the Smartphone has been costly as its market share of industry profits fell from 64% in 2007 to 32% in 2009, according to Deutsche Bank.
Investor sentiment in Nokia is divided between the main Finnish listing and the ADR. Investors trading the ADR have been gradually increasing their short positions over the past six months to a high of 2% of total shares outstanding on loan, representing over 40% of the lendable supply. However, there has been a slight move in short covering in the two weeks running up to the announcement of the tie up with Microsoft. Holdings of long only funds who lend, which can also be viewed as a proxy for short selling, have decreased by 17% since January to 85 million shares. The Finnish listing of Nokia has been subject to short covering from 2.8% to 2% of total shares outstanding on loan since October. Institutional investors have also been positive towards the stock, increasing holdings by 10% to 740 million shares over the same time period.
Rumors are circulating at the Mobile World Congress that Apple is working on a “nano” iPhone. The new iPhone would be in-line with the company’s strategy to create a product family similar to that of the iPod. Short interest is low, as always, but has fallen from the annual high of 0.8% in December to 0.5% of total shares outstanding on loan. Institutional ownership continues to climb with the share price and currently stands at 206 million shares.
Sony Ericsson has released its long awaited phone which doubles as a PlayStation gaming console. The Swedish firm, Telefon AB LM Ericsson, is also working with Akamai to provide cloud computing services later this year. Securities lending activity in this stock is low with short interest flat at 1.6% of total shares outstanding on loan. Institutional investors seem to be warming to the stock as holdings have increased by 10% to 680 million shares over the past three months.
The CEO of Research in Motion dismissed reports of a delay to the release of its PlayBook tablet, which is set to rival the Apple iPad. The company also announced that its Blackberry App World is now available in 101 markets. Short interest in the Canadian and US listings of the stock indicate a split in sentiment amongst investors. The Canadian listing has been subject to short covering with short interest halving to 3% of the total shares outstanding on loan over the past six months. However, short interest in the US listing is low, but has almost doubled to 2% since December.
Taiwan handset manufacturer, HTC Corp, has rolled out a new “Facebook” phone which it built with INQ Mobile. There was an influx of short covering in October as the share price surged and short interest fell from 2% to 0.6% of total shares outstanding on loan.
