Nokia is Striking Back
Nokia corporation (NYSE: NOK) is a Finnish communications and information technology multinational corporation that is headquartered in Espoo, Uusimaa. As of September 2013, Microsoft announced that it will acquire Nokia’s phone business and license it patents for 5.44 billion euros. After the acquirement, Nokia’s plan is to focus on three core technologies: the networking infrastructure (NSN), the maps and location-based services (HERE), and Advanced Technologies. Nokia gave details of how Microsoft will license Nokia’s brand, indicating that Microsoft has agreed to a 10-year license arrangement with Nokia to use the company’s brand name on current and subsequently developed products based on the Series 30 and Series 40 operating systems. Upon the closing of the transaction, Nokia would be restricted from licensing its own brand.
Nokia may have sold their phone business to Microsoft, but it held on of their most valuable assets, their brand name. Worth around $3.2 billion, Nokia’s brand name is ranked 98th of the most valuable brand names worldwide. Nokia plans to profit from their brand name by licensing it to other companies. As Nokia is restricted from featuring phones for the next 10 years, after 2016 they can brand smartphones. It could therefore be achievable that another company can develop a new piece of hardware and simply put Nokia’s on it.
Sebastian Nyström, Head of Products at Nokia Technologies, confirmed that the company has new ideas for its brand, stating “We are pleased to bring the Nokia brand back into consumers’ hands with the N1 Android tablet, and to help make sophisticated technologies simple.” He continued, “The N1 has a delightfully intuitive interface and an industrial design to match it. This is a great product for Nokia fans and everyone who has not found the right Android tablet yet.”
Shares of Nokia opened at $7.68 on Monday, November 17th. The communications and information technology corporation has a 1-year high of $8.73 and a 1-year low of $6.64. The daily moving average is $7.67 and the 50-day moving average is $8.15. The market cap for Nokia is $28.21 billion and its P/E ratio is 8.20.
On November 17 th, Michael Walkley of Canaccord Genuity downgraded his rating on Nokia from Buy to Sell. Walkley has an overall success rate of 71% recommending stocks with an average return of +23.5% per recommendation.
Separately on November 17th, Sandeep Deshpande from J.P. Morgan reiterated a Buy rating on Nokia. Deshpande referred to Nokia’s restructuring noting, “Key in the release ahead of Nokia’s CMD today is that management believes networks has changed fundamentally and that they are raising long-term guidance to 8-11%, i.e. 9.5% at mid-point, from 5-10%, i.e. 7.5% at mid-point, guidance that was initially given many years ago. We would look at the same 8-11% ‘15 guidance as normal practice at this early stage of ’15 planning despite it being lower than current SME Direkt consensus, as Nokia normally updates that through the year. Key in this CMD, in our view, is for investors to understand and get comfortable with strategy and growth in HERE and Advanced Technologies. Deshpande has an 44% success rate recommending 9 stocks with an average return of +11.3% per recommendation.
On average, the top analyst consensus for Nokia is Hold.