Reality Sets in at Nokia (NOK, AAPL, GOOG)

Nokia Corporation (NYSE: NOK) was originally trading higher on earnings but shareholders have grown very used to disappointment by this fallen leader. The troubled cellphone maker managed to show third quarter revenue and earnings that were somehow ahead of depressed analyst estimates. Now shares are lower as reality has set in.

In a world dominated by Apple Inc. (NASDAQ: AAPL) iPhones and by Google Inc. (NASDAQ: GOOG) Android phones. Can the Lumia really unseat the iPhone or the continuous growth of different Android-based smartphones? This just seems unlikely for the time being. Nokia's sales were down a sharp 19% to 7.24 billion euros with a 0.07 euros net loss. We had seen estimates as being for a drop of over 20% in sales down to as low as 6.84 billion euros and a loss as wide as 0.09 to 0.10 euros. Nokia's normalized operating margin rise to 1.1% from a negative margin in the prior sequential quarter. That drop in sales and the low or negative margin can be directly tied to Apple and Google.

The smartphone sales were down over 50% due to the new Lumia transitions (and likely due to consumers waiting for the new iPhone 5 in the third quarter). Unfortunately, the total unit volumes were down by 1% sequentially to almost 83 million units. That is down over 20% from a year ago. One area that remains strong is the equipment orders running at a 3% sales growth rate to about 3.5 billion euros.

As a reminder, this current quarter that we are already in is the quarter that we are expecting the new Lumia smartphones with the Windows 8 operating system. It is at least going to be here in time for the holidays. Unfortunately, the new iPhone 5, new Android phones, and even the legacy iPhone 4s sales may act as more than formidable competition. All this is happening at a time when Blackberry phones are not even posing any real threat.

Nokia ADRs are down 3% at $2.85 and we have seen more than 82 million shares trade. While 56 million is an average day's volume, that may easily be doubled today. Nokia's 52-week range is $1.63 to $7.38 and the shares had run up from under $2.60 at the end of last week ahead of the earnings report.