JPMorgan Reinstates Nokia (NOK) at Overweight; Large Patent Trove is Potential Gold Mine

December 6, 2013 12:29 PM EST
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Price: $4.56 -1.08%

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JPMorgan reinstates Nokia Corp (NYSE: NOK) at Overweight and price target of €8 ($10.80).

Analyst Sandeep Deshpande noted the substantial potential Nokia has to monetize its patent portfolio. He thinks that if Nokia were able to take in 1 percent royalty per device, the firm's price target would easily move to €15.

Deshpande commented, Nokia has a broad patent portfolio (ex NSN) of ~10k patent families comprising ~30k patents. Only ~10% of the patents are externally licensed & Nokia has built a large trove of implementation patents which are linked to its essential patents.

There is two key ways Nokia can fully monetize its patents:
  1. Getting better terms on new licensing deals given that Nokia has a stronger share of LTE patents versus 3G; and

  2. Broader licensing and enforcement of non-essential patents.
There might also be opportunity for Nokia in unraveling cross-licensing agreements. Say Nokia licensed certain IP to Apple and doesn't need that access any more, it would be able to sell that patent in whole.

Nokia also recent won an injunction against handset maker HTC. Deshpande sees two points in this segment:
  1. Qualcomm's (Nasdaq: QCOM) LTE chips contain Nokia IP; and

  2. While Qualcomm is a licensee, the right does not pass through to its customers. HTC would need to obtain its own license with Nokia.
Deshpande comments, Qualcomm sells over 700 million
of these chips every year and once this case precedent has been set, Nokia can use it to claim royalties on that IP from many other infringing companies. The results of the key Samsung arbitration re additional payments will be known in early 2015 as well which should be a catalyst.

For an analyst ratings summary and ratings history on Nokia click here. For more ratings news on Nokia click here.

Shares of Nokia closed at $7.73 yesterday, with a 52 week range of $3.02 to $8.18.

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