Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) may be worth between €5.2 and €5.6 per share, according to Bernstein analysts. However, they say their sum of the parts valuation is only valid if the struggling company breaks up and sells itself off piece by piece. If Nokia stays together—as they expect—they see it as being worth only €4.5 per share.


Valuing Nokia’s parts

Analysts Pierre Farragu, Jasmeet Chadha and Viral Gandhi examined each of the three main divisions of Nokia that will be left after the deal with Microsoft Corporation (NASDAQ:MSFT) completes: Here maps, Advanced Technology (intellectual property) and NSN. In addition to those divisions, Nokia has about €7.9 billion in net cash and approximately €1 billion in deferred tax assets.

Using a sum of the parts valuation technique, the analysts said their estimate of worth between €5.2 and €5.6 per share would only be valid if the whole company breaks up. They would see Nokia’s Here maps as being sold as a strategic asset, its Advanced Technology division “run as a pure IP play” or being sold, and NSN being run independently. They also see all of Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s extra cash being returned to shareholders.

If Nokia stays together

The analysts note that a breakup is highly unlikely because of comments made by Nokia management. They said if the company keeps all three of its divisions and then distributes its extra cash to shareholders “only partially” so that it can keep its strategic options only, then they see a 17% conglomerate discount on the valuation. This would make Here’s value be fully discounted and give a 50% discount on Nokia’s net cash. Their current price target is based on this scenario, under which they estimate that Nokia is worth €4.5 a share.

The analysts see too many downside risks for Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) in 2014 and are estimating earnings which are 15% below consensus expectations. However, they don’t see the company as a short candidate because they see too many question marks right now. Specifically, they said sentiment on Nokia’s Advanced Technology division could change, and NSN margins could cause a pull back.