Nokia Corp (ADR) (NYSE:NOK) is in back in favor on the stock markets again. The company reported fourth-quarter results where revenue missed consensus estimates, but earnings of $0.04 per share still beat analyst’s forecasts for Nokia stock.
Even Morgan Stanley upgraded NOK stock on Feb. 7. Chances are good that Nokia stock will continue bouncing higher.
Morgan Stanley cited this year as a possible turning point for NOK’s business. It pointed to earnings stability and cost cutting as reasons for getting optimistic about Nokia stock’s prospects. The analyst also cited expectations for royalty fees from Apple Inc. (NASDAQ:AAPL) in 2018 as another reason for growing bullish on the stock.
Nokia sued Apple on December 22, 2016, for violating 32 patents. But despite the potential win, NOK is hardly guaranteed a victory in its suit against Apple.
BlackBerry Sues Nokia
While Apple is suing Qualcomm, Inc. (NASDAQ:QCOM) for $1 billion with two antitrust claims, BlackBerry Ltd (NASDAQ:BBRY) is suing Nokia for patent infringement. This continues the trend in technology today: litigation is back. This isn’t the first time the two companies have gone head-to-head. Back in 2012, the courts ruled that BlackBerry must pay Nokia royalties on patents that cover WLAN technology.
Despite its previous loss, BlackBerry complained that Nokia’s products, including Flexi Multiradio base stations, Liquid Radio software and radio network controllers infringe on 11 patents. According to a report by Bloomberg: “The mobile network products and services are provided to companies including T-Mobile US Inc. and AT&T Inc. for their LTE networks.”
BlackBerry’s claims may be on protecting intellectual property that uses an industry-wide technology standard known as 3GPP. If it wins, BBRY would get licensing fees for their fair and reasonable use.
NOK’s Patent Revenue Is Steady
In the fourth quarter, patent revenue clients grew. According to Nokia, “Our patent licensing business has also progressed, adding more licensees as well as concluding our arbitration and reaching an expanded licensing deal with Samsung. We also reached a band licensing agreement with HMD Global, which has already launched a Nokia-branded smartphone in China.”
For the fiscal year of 2017, NOK forecasts generating $847 million from patent and brand licensing. Nokia stock investors should keep in mind this estimate does not include a litigation win against Apple or any other ongoing lawsuits.
Patent revenue isn’t the only high mark for NOK stock. Nokia’s network division showed signs of life in the fourth quarter, thanks to its acquisition of Alcatel Lucent. Strong bookings for Alcatel Submarine Networks will follow with more business deals this year. Nokia expects its Networks division to make $952 million in revenue this year.
Nokia stock also has potential growth from 4.5G and 4.9G to back it up. NOK ended the fiscal year with 110 service provider customers on 4.5G, all of which it aims to sell 4.5G Pro.
As businesses implement Internet of Things solutions, they will need low latency and 4.5G Pro offers lower latency, to 10 milliseconds and higher actual bandwidth speeds of nearly 1 gigabyte. The unit is developing 4.9G, with latency drops to 7 milliseconds and bandwidth that reaches 2 gigabytes. Nokia thinks 4.5G Pro demand will pick up this year while 4.9G will be ready in 2018.
Bottom Line on Nokia Stock
NOK stock will likely maintain its $5 per share stock price. The fourth quarter built confidence for investors who look at Nokia stock as an investment in networking. Carrier upgrades and adoption of IoT will drive revenue for its Networks division, and that will bode well for its share price.
With all of that in mind, look for NOK stock to climb steadily through to the second half of this year and early next year.
As of this writing, Chris Lau owns shares in BlackBerry and Nokia.
