After reporting a weak third quarter, Nokia Corp (ADR) (NYSE:NOK) pleased investors this time around by reporting that it would raise its dividends. It will go up from 17 cents to 18 cents a share.
Despite other disappointments in its fourth quarter, investors bid NOK higher last week. What may follow for Nokia shares is the $5 level.
NOK Stock Earnings Rundown
Weak Network Division: Sales at NOK’s Network division fell 14% year-on-year. The market remains weak but Alcatel-Lucent lifted the performance of the unit. And Nokia maintained a strong gross margin of 40.6%. Operating margin of 8.9% for the full year is within the guidance NOK provided.
Nokia Technologies: NOK’s earnings did not benefit from IP payments from Samsung Electronics (OTCMKTS:SSNLF) in the fourth quarter. The company expanded its IP licensing agreement. This is a move that should boost revenue for the technologies unit.
Cashing in on Apple: Just as Apple Inc. (NASDAQ:AAPL) is cashing in on patents by suing Qualcomm, Inc. (NASDAQ:QCOM) for high IP royalties, Nokia is suing Apple for infringing on Nokia patents. With 50 patents involved in the suit, expect Nokia at least getting something from Apple. Also, Nokia said:
“As of today, in actions across 11 countries in Asia, Europe and the US, there are now more than 50 Nokia patents in suit, covering technologies such as display, user interface, software, antenna, chipsets, video coding, as well as 3G & 4G cellular standards. Apple has also filed certain complaints against Nokia.”
At 1.15 times sales, investors are not pricing a litigation win in favor of Nokia. Even if NOK is successful, it will take years before the court makes a ruling. Nokia is not the only stock trading at low valuations. Ericsson (NASDAQ:ERIC) is valued at 0.7 times sales. ERIC reported quarterly results that only met earnings expectations. It earned seven cents per share in the quarter, compared to 13 cents per share for Nokia stock, which beat the consensus by five cents.
On its press release, NOK highlighted the $115 billion IP portfolio it holds, thanks to its ownership in Alcatel-Lucent. This further suggests that markets are ignoring the potential for more monetization of IP in the years ahead.