Should Bottom-Fishers Scoop up Nokia?

Over the years, Nokia (NOK) has been a very inconsistent company. Nokia has struggled a lot because of its inconsistencies and the stock is now trading close to its 52-week lows due to several factors. However, in this article, I will explain why Nokia’s worst days may be behind it. I believe that investors should scoop the stock while it is trading near 52-week lows.


At present stage, success of Nokia totally depends on its management capability to keep costs under check. Nokia acquisition of Alcatel will play a big part in keeping costs under check.

Nokia estimates that it will remove about 10,000 to 15,000 positions from the combined staff of 104,000, seeking savings by reducing coinciding products, services, and sales positions. Savings from the merger are set to surpass Nokia’s previous estimate and top 900 million euros in 2018, and this will definitely have positive influence on the company’s bottom line. However, the company’s prevailing management team has proven to be proficient at driving cost declines and having reduced IFRS opex by 5 percent in the last two years.

Recently, Nokia shared that it has made a $1.5 billion framework deal with China Mobile to provide the operator with infrastructure and equipment for operating a cloud network. Moreover, the Finnish telecom firm said that the one-year deal with its foremost Chinese client involves all-in-one connectivity that will more proficiently meet the constantly rising demand of data by subscribers to the world’s largest mobile operator.

On the other hand, Nokia said that it will provide China Mobile with a new and advanced type of 5G-ready base station permitting several radio technologies to operate concurrently. The new 5G-ready base station will also support numerous connection speeds in one base station. China Mobile is Nokia’s foremost client as well as venerable business partner. The company can generate huge profit from these new 5G-ready base stations.

Apart from this, Nokia is returning back to its smartphone business, as a newly established company in Finland named, HMD Global, has received a 10-year private worldwide license to manufacture and sell Nokia’s smartphone and tablets. Moreover, Foxconn is also involved in this deal. It is probable that the company will receive $3-$15 per device in licensing fees, as the agreement also comprises of Nokia’s patent library.

Apple iPhone is mainly known for its stunning design, and Foxconn has decided to manufacture Nokia-branded Android smartphones grounded on the design of iPhones. This is an amazing idea and Nokia will benefit a lot if Foxconn successfully launches a new iPhone-looking Nokia’s Android smartphone. The company’s patent and brand licensing fees from HMD Global will generate enduring rewards for investors.


All in all, I believe that all the negative news is already baked in Nokia’s current share price. The risk-reward ratio is extremely favorable for long-term investors as the stock has limited downside at current levels, making it a decent pick.

Published on Jun 21, 2016
By Prudent Investor

Copyrighted 2020. Content published with author's permission.

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