Financial Crisis And The Recession: Why Nokia Could be a Value Play

Financial Crisis And The Recession: Why Nokia Could be a Value Play

Since 2008, at the beginning of the financial crisis and the recession,the overall sales picture has been one of volatility and strong promotional activity has been consistently and effectively driving our sales increases. This strategy was designed with 18 to 24 months of effectiveness in mind and we stuck with it for more than 60 months since — as the economy remained weak. Now the strategy has become less effective.

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Financial Crisis And The Recession

The decline in traffic is because existing customers are returning slightly less frequently and the decline in the transaction size is because both new and existing customers are purchasing slightly fewer items that’s slightly below our prices. It makes sense when you consider the saturating effect of our intense promotional activity over the past several years.
  • Beware of linear arguments (past doesn’t equal the future)
  • Smaller pain now or bigger pain later
  • “It” doesn’t have to end to stop working
  • Uncertainty = lower valuations
  • ATEA (ATEA in Oslo)
  • 6.5 NOK ($1.03b ) market cap
  • No net debt
  • Sales – 20b Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) (Sweden, Norway, Denmark and Finland)
  • 60% of sales from hardware sales, 20% software, 20% services
  • Growth 2-3% about market (takes market share)
  • EBITDA (our approximation): products 3.5%; services 7%
  • Good management – set goals, reached them

Financial Crisis And The Recession

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I was born and raised in Murmansk, Russia (the home for Russia’s northern navy fleet, think Tom Clancy’s Red October). I immigrated to the US from Russia in 1991 with all my family – my three brothers, my father, and my stepmother. (Here is a link to a more detailed story of how my family emigrated from Russia.) My professional career is easily described in one sentence: I invest, I educate, I write, and I could not dream of doing anything else. Here is a slightly more detailed curriculum vitae: I am Chief Investment Officer at Investment Management Associates, Inc (IMA), a value investment firm based in Denver, Colorado. After I received my graduate and undergraduate degrees in finance (cum laude, but who cares) from the University of Colorado at Denver, and finished my CFA designation (three years of my life that are a vague recollection at this point), I wanted to keep learning. I figured the best way to learn is to teach. At first I taught an undergraduate class at the University of Colorado at Denver and later a graduate investment class at the same university that I designed based on my day job. Currently I am on sabbatical from teaching for a while. I found that the university classroom was not big enough for me, so I started writing and, let’s be honest, I needed to let my genetically embedded Russian sarcasm out. I’ve written articles for the Financial Times, Barron’s, BusinessWeek, Christian Science Monitor, New York Post, Institutional Investor … and the list goes on. I was profiled in Barron’s, and have been interviewed by Value Investor Insight, Welling@Weeden, BusinessWeek, BNN, CNBC, and countless radio shows. Finally, my biggest achievement – well actually second biggest; I count quitting smoking in 1992 as the biggest – I’ve authored the Little Book of Sideways Markets (Wiley, 2010) and Active Value Investing (Wiley, 2007).
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