Recent Plunge in Nokia (NOK) Shares Makes It One Cheap Acquisition
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Nokia (NYSE: NOK) shares are indicated for a much higher open Friday (over 2 percent) following speculation about a little M&A from the Finnish phone giant.
Following the recent plunge in stock price, shares of Nokia now trade at just 62 percent the value of its net assets, the lowest on record according to Bloomberg data going back some 17 years. The valuation comes as Nokia announced plans for 10,000 job cuts, marketing and mobile management changes, facility closings, and more, on Thursday.
Nokia is looking to divest its portion of the unprofitable venture with Siemens AG (NYSE: SI) and is relying solely on Microsoft's (Nasdaq: MSFT) Windows Phone -- a platform which hadn't made a dent in the mobile industry after its introduction - to move shares higher. Both efforts have driven shares to the brink. Once trading north of $30 just four to five years ago, the stock has lost over 90 percent of its value as investors continue hitting the "Sell" button. Of note, Apple's (Nasdaq: AAPL) iPhone debuted five years ago. For a similar view of the iPhone's impact on the mobile industry, see Research In Motion (Nasdaq: RIMM). The introduction and rapid spread of Google's (Nasdaq: GOOG) Android platform did little to slow the great investor egress.
This morning Bloomberg is highlighting a Falcon Point Capital analyst who kindly hinted that Microsoft should buy the company. Should Nokia be able to show a little growth -- just a little bit -- the acquisition might immediately be a profitable one.
Nokia has about $12.4 billion of cash and equivalents on the books, or $5.9 billion net of debt. That's 68 percent of its total market cap (currently at $8.6 billion). That also might be attractive for a "go private" transaction, where little in the way of transformation will be needed in order to gain some value from the company.
Nokia CEO Steven Elop alluded to asset sales, including a portion of its patent portfolio. That might be a lucrative move for Nokia, as an analyst at MKM Partners sees the patents valued at about $7.5 billion. The value of Nokia's intellectual property outpaces that of Motorola Mobility, which Google (Nasdaq: GOOG) recently bought for $12.8 billion.
MKM Partners also painted a dire outlook, expecting no buyers to appear while Nokia is still losing market share.
With Nokia still in a transitional phase and lack of interest continuing with its smartphones, cash burn is the most likely scenario. Analysts' best case calls for no actual transactions to happen within a year or so, plenty of time for Nokia to shift to the new Windows 8 platform and see how sales pan out. Should it be able to shore up operations, shares might also quickly double...which would make an acquisition that much more expensive for Microsoft, private equity, or other buyers.
Following the recent plunge in stock price, shares of Nokia now trade at just 62 percent the value of its net assets, the lowest on record according to Bloomberg data going back some 17 years. The valuation comes as Nokia announced plans for 10,000 job cuts, marketing and mobile management changes, facility closings, and more, on Thursday.
Nokia is looking to divest its portion of the unprofitable venture with Siemens AG (NYSE: SI) and is relying solely on Microsoft's (Nasdaq: MSFT) Windows Phone -- a platform which hadn't made a dent in the mobile industry after its introduction - to move shares higher. Both efforts have driven shares to the brink. Once trading north of $30 just four to five years ago, the stock has lost over 90 percent of its value as investors continue hitting the "Sell" button. Of note, Apple's (Nasdaq: AAPL) iPhone debuted five years ago. For a similar view of the iPhone's impact on the mobile industry, see Research In Motion (Nasdaq: RIMM). The introduction and rapid spread of Google's (Nasdaq: GOOG) Android platform did little to slow the great investor egress.
This morning Bloomberg is highlighting a Falcon Point Capital analyst who kindly hinted that Microsoft should buy the company. Should Nokia be able to show a little growth -- just a little bit -- the acquisition might immediately be a profitable one.
Nokia has about $12.4 billion of cash and equivalents on the books, or $5.9 billion net of debt. That's 68 percent of its total market cap (currently at $8.6 billion). That also might be attractive for a "go private" transaction, where little in the way of transformation will be needed in order to gain some value from the company.
Nokia CEO Steven Elop alluded to asset sales, including a portion of its patent portfolio. That might be a lucrative move for Nokia, as an analyst at MKM Partners sees the patents valued at about $7.5 billion. The value of Nokia's intellectual property outpaces that of Motorola Mobility, which Google (Nasdaq: GOOG) recently bought for $12.8 billion.
MKM Partners also painted a dire outlook, expecting no buyers to appear while Nokia is still losing market share.
With Nokia still in a transitional phase and lack of interest continuing with its smartphones, cash burn is the most likely scenario. Analysts' best case calls for no actual transactions to happen within a year or so, plenty of time for Nokia to shift to the new Windows 8 platform and see how sales pan out. Should it be able to shore up operations, shares might also quickly double...which would make an acquisition that much more expensive for Microsoft, private equity, or other buyers.
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