Nokia Corporation (ADR) (NOK) Positives Offer Hope, But More Detail Needed

Nokia 8Hermann / Pixabay

UBS analysts Gareth Jenkins and David Mulholland maintain a Neutral rating for Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) as they examine some recent news and notes from the company.

We met senior management from Nokia Solutions and Networks (NSN). The new detail was: 1.NSN sees a sense of rationality returning to the industry and cites limited price aggression 2. The company sees further consolidation around the top 3 vendors as tier 2 vendors struggle 3. While Ericsson (ADR) (NASDAQ:ERIC) cites incumbency, Alcatel Lucent SA (ADR) (NYSE:ALU) (EPA:ALU) cites its Intel relationship/openness and Cisco Systems, Inc. (NASDAQ:CSCO) sees its application layer prowess differentiating in a virtualised mobile world, NSN believes it has a time to market advantage evidenced by 50 customer trials (and 2 wins) in the area 4. Focus clearly remains on FCF/profitability though the company intends to regain European market share 5. Chinese spend is now ramping LTE in earnest.

Given the positives and it is well managed, why not be more positive?

While we recognize the solid management (and importantly its information systems) and focus on cost reduction, until NSN stabilizes its top line (-22% in Q4 y-o-y) and more detail around the IPR business is forthcoming, it is difficult to be more constructive on Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V).

Questions over Nokia’s product gaps

NSN highlighted that it would seek to partnership with others to fill out product gaps citing it has been successful with these in the past. We are concerned however, similarly to Ericsson-Ciena that decision-making/roadmap choices will be less aligned with partnerships than under a fully integrated model such as Alcatel Lucent SA (ADR) (NYSE:ALU) (EPA:ALU).


Our DCF based valuation (WACC 9%, g 2%) remains €5.4/share. Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) trades on 8.0x EV/EBITDA 15E vs. its peers on 8.5x.

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1 Comment on "Nokia Corporation (ADR) (NOK) Positives Offer Hope, But More Detail Needed"

  1. If there is any industry in the world these days that is not saturated yet, it is telecom networks.
    This trend will continue for at least few years from now.
    Network traffic will increase 100 fold and physical boundaries of technology are to be encountered.
    NSN’s liquid net solutions are targeted to overcome those physical limitations.
    Network load will have to be distributed among several radios listening same device at the same time. Servers at base stations need to have more local data and intelligence to keep internet traffic and latency in minimum.
    Meanwhile HERE will provide positioning data to call help in case of accident, enable taxation based on mileage, find out vehicles whereabouts in case of insurance claim, provide individual traffic information about the best route during traffic jams, etc,
    I think Nokia is well positioned for the future to come.

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