News that Microsoft (MSFT) will buy Nokia’s (NOK) phone handset business (and non-exclusive, 10-year licenses to Nokia’s patents) for $7.2 billion sent shares of Nokia soaring—up 31.28% as of the New York close today—and shares of Microsoft tumbling—down 4.55%.
I think two things are behind the size and direction of these moves.
First, by selling its money-losing phone device business Nokia has removed the biggest worry about its continued existence—that it would run out of cash before it managed to turn around its phone business (if it could.) Read more
Nokia joins the phone parade: Rumor says it will join Apple and Samsung with September product announcements
Add Nokia (NOK) to the list of phone companies likely to announce a big product in September.
Rumor pegs a big Nokia announcement for a two-day event to be held in New York, maybe, in late September. The event, according to the blogs MyNokia http://mynokiablog.com/ and electronista.com http://www.electronista.com/, will launch Nokia’s first Windows Phone phablet (a hybrid of a phone and a tablet.) Rumors say the phablet will have a 1080-resolution display although the size of the screen is even less certain than other details about the product. The device would also be the first Nokia smartphone based on a quad-core chip instead of the dual-core chips in the Lumia 1020.
September is shaping up as a very busy month for phone makers as they attempt to steal some of the thunder from Apple’s new iPhone rumored for launch on September 10. Besides Nokia, Samsung plans a September 4 launch event for a new large-screen Galaxy Note phablet (a phone/tablet hybrid) and a smartwatch called “Galaxy Gear.”
Apple and Nokia are both members of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/, I liquidated all my individual stock holdings and put the money into the fund. The fund may or may not now own positions in any stock mentioned in this post. The fund did own shares of Apple as of the end of June. For a full list of the stocks in the fund as of the end of June see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/.
Nokia: Near-term good news in the mobile network gear market but long-term struggles remain in handsets
Nokia (NOK) climbed 3.21% today. (Nokia is now up 25.7% from the April 19 low and 10.8% from May 31 as of the close on July 1.)
Apparently the markets really liked the news that Nokia will acquire Siemens’ (SI) 50% share of their joint venture Nokia Siemens Networks for 1.7 billion euros ($2.2 billion.) Nokia Siemens is the No. 3 maker of mobile telecom equipment in the world behind Ericsson (ERIC) and Huawei.
What does the deal bring to Nokia? Read more
Investors weren’t happy to be reminded of how long a slog Nokia (NOK) still faces. The company reported earnings of 0.06 euros this morning, before the open in New York. That was a euro cent above Wall Street estimates. Revenue fell 19.6% from the fourth quarter of 2011 to 8.04 billion euros. That was just below the consensus of 8.06 billion euros.
The big news, however was that the company was suspending its dividend for 2013 in order to conserve cash. (Dividends in 2012 came to 20 euro cents a share.) In the quarter Nokia’s cash position improved by 800 million euros to 4.36 billion euros on December 31.
Yes, indeed management thinks the company has a tremendous amount of work ahead of it.
In the quarter the company managed to scratch out a very tiny positive operating margin in its device business of 1.3% (if you include one-time royalty income. Otherwise the device business broke even.) In the fourth quarter Nokia shipped 15.9 million smart phones with 4.4 million of those being the company’s new Lumia phones, 2.2 million being Symbian legacy phones, and 9.3 million being low-priced Asha feature phones.
The biggest problem for Nokia remains its lack of traction in the U.S. market. The company sold 700,000 phones in North America during the fourth quarter (out of global sales of 4.4 million.) That was ahead of the 300,000 phones sold in North America in the third quarter, but lagged analyst hopes for sales of 1 million to 1.2 million. (For context Apple’s (AAPL) global shipments of iPhones totaled 47.8 million in the fourth quarter.)
What to do with your shares now?
Nokia was heavily shorted going into today’s quarterly earnings announcement. (The shares were down 7.76% as of 2 p.m. in New York.) The company’s very positive January 10 preannouncement set up the actual earnings release to be a disappointment, especially because the company also lowered guidance for the first quarter of 2013. (I expect many of the shorts to cover in the next few days so if you’re looking to sell you might want to wait a bit.)
If you’re swing trading this stock, I’d wait to see if it might pull back further as analysts work that lowered guidance into their estimates for the first quarter. And then I’d wait some more for the company to actually report a fairly gruesome first quarter. Nokia has told investors that it expects operating margins in the first quarter for its device business of between +2% and -6%. Cash burn in the quarter is likely to be enough to raise fears again about whether the company might run out of cash.
If you are just holding the stock, patiently, for Nokia’s long-term recovery, I think your patience is going to be tried over the next few months. The stock was up 77% from November 8 through the January 23 close and it would only be reasonable to expect the shares to give some of that back in the next couple of months. I still expect Nokia to reach my target price of $7.80 a share but the shares won’t reach it without a pullback and consolidation—especially with the company’s guidance for the first quarter of 2013 as background. (Nokia is a member of my 12-18 month Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/, may or may not now own positions in any stock mentioned in this post. The fund did own shares of Nokia as of the end of September. For a full list of the stocks in the fund as of the end of September see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/
For the last few days all the important smartphone news has been about China.
On Friday, November 30, Apple confirmed educated speculation that the Wi-Fi versions of the iPad Mini and the fourth generation iPad will go on sale in China on December 7 and that the iPhone 5 itself will go on sale in China on December 14. This backs up a notice on a Chinese regulatory website that reported the approval of a “network access” license for a device that looked like the iPhone 5. China Telecom (CHA) and China Unicom (CHU) are expected to sell the phone. China Telecom chairman Wang Xiaochu said recently that he expected his company to get Apple’s phone by early December.
Today markets got confirmation that China Mobile (CHL), the third of China’s big three wireless companies, will start selling a model of Nokia’s new Lumia 920 that will be compatible with China’s homegrown TD-SCDMA wireless technology. (Bloomberg broke this story yesterday.) This would be a big deal for Nokia because Read more