Nokia Corporation (ADR) (NOK) Coverage Reinstated At Overweight: JPM

Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) appears to be making progress on a turnaround, in the view of analysts at JPMorgan Cazenove. They have reinstated coverage of the company with an Overweight rating after following it on an unrated basis for some time. However, they need to see monetization of Nokia’s intellectual property portfolio in order for the company to keep that Overweight rating.

Nokia Corporation (ADR) (NOK) Coverage Reinstated At Overweight: JPM

Potential lies in Nokia’s patents

Analyst Sandeep Deshpande and the rest of the JPMorgan Cazenove team see Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s patent portfolio as being one of the keys to the company’s turnaround. They see “substantial unrealized opportunity” in monetizing Nokia’s patents. They note that excluding Nokia Solutions Networks (formerly Nokia Siemens Networks), the company had about 10,000 patent families with a cumulative total of around 30,000 patents. They said only about 10% of them are licensed externally and that Nokia has “a large trove of implementation patents which are linked to its essential patents.”

As a result, they see two different ways Nokia can increase its patent monetization. The analysts said Nokia could push for better terms on its future licensing deals because the company has a bigger share of essential LTE patents than it did in 3G essential patents. The second way Nokia could increase patent monetization is by licensing its patents more widely and also enforcing its non-essential patents. The JPMorgan Cazenove team also sees additional potential in cross-licensing certain patents. Nokia apparently has access to some of the intellectual property belonging to their licensees and no longer needs that access.

Nokia’s first IP catalysts on the horizon

The analysts note that it won’t be long before we start to see some catalysts from Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s new efforts to more fully monetize its patents. The company has obtained an injunction against HTC in the U.K. in connection with one of its key non-essential patents. Some of HTC’s more popular handsets like the HTC One mini are part of the injunction.

Another win for Nokia deals with its licensing of patents to QUALCOMM, Inc. (NASDAQ:QCOM). Those rights do not pass through to Qualcomm’s customers, so those customers need their own independent licenses from Nokia. Since Qualcomm sells more than 700 million of the chips in question every year, Nokia could see a windfall here after this precedent has been set.

The analysts also said the case with Samsung paying more should be decided early in 2015 and could be an additional catalyst for Nokia.