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Global Expert Calls Nokia A 'Steal'

 June 05, 2012 12:08 PM
 


by Vivian Lewis, editor Global Investing

The current share price of Nokia (NOK) corresponds to about half its total assets, a market value of under $11 billion vs. cash and short-term investments at the same level.

For free you get its inventory, accounts receivable, and plant and equipment, plus a portfolio of patents offset by liabilities that are lower than the non-cash positions. In my view, it's a steal.

The Nokia Siemens Networks telephone exchange infrastructure joint venture beat out Alcatel Lucent in landing T-Mobile's coveted US 4G LTE contract, sharing with Ericsson.

Nokia also launched cheaper mobile phones, the 110, 111, 112, and 113 equipped with games and cameras and for the 111-3, dual SIM capacity.

They will use the cloud to smooth internet links to work well for social media. These cost euros 35, about $42 at present exchange rates.

Nokia is lining up app developers for its Lumia windows-inside smartphones, starting with fellow-Finn Rovio (of Angry Birds).

Rovio has agreed tp create new exclusive games for Lumia cellphones. And in case Rovio doesn't get players hooked, Electronic Arts will develiver different games.

Other apps will come from Groupon which is developing location data with camera views for massing customers. PayPal meanwhile will set up an exclusive Lumia smartphone payments process.

Dodge & Cox manager Diana Strandberg argues for Nokia based on "a wide range of outcomes" because of its "very low valuation" for its R&D, its cash flow, "future earnings potential or lack", "the value of the patent portfolio".

She also said "We ask ourselves, does management have a sense of urgency? Do they understand the problem and the speed they need to fix it? And Nokia management does."

She went on: "Do they have other resources they can call on? We would point to their partnership with Microsoft, where they have a deep-pocketed partner contributing financial resources to the joint venture." She also cited its distribution prowess in emerging markets. Strandberg was interviewed by Morningstar TV.

Separately, Sprint appears to be following AT&T in supporting the NOK Windows-inside phone. The reasoning is that Apple wants to set up its own competing wireless network rather than merely selling phones.

The recovery of Nokia Siemens telephone exchanges mean the stock is worth north of $4.50 and trades for under $3. In my view, the stock price is completely ridiculous. I have again averaged down on the share price.

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