Nokia Oyj (ADR) (Nok) Stock Is a Case of Image vs. Reality

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I have a love-hate relationship with Nokia Oyj (ADR) (NYSE:NOK). The things I love about it don’t work, and the things I hate about it seem to.

Nokia Oyj (ADR) Nok) Stock a Case of Image vs. Reality

When I wrote about the company in January, I was angry about what I considered their patent trolling. Nokia was licensing the breakthroughs of its past to companies that exist only to make money through lawsuits.

This has worked for the stock. Nokia is up 35% since I wrote my story. The company’s actual results have been poor — a loss of 489 million Euros, or 8 euro-cents per share, on revenue of 5.378 billion Euros – but the loss was narrower than a year ago, even if the top line was lighter, and trolls are very Scandinavian.

Our Richard Saintvilus says this can be a $10 stock as investors catch up with an “improving narrative”  — what is the narrative?

The Narrative for NOK Stock

Nokia today is mostly a cell industry infrastructure company. It makes the equipment cellphones connect with, the gear that moves radio signals back and forth between the air and the wired internet, radios and multiplexers that slice-and-dice frequencies for maximum digital throughput.

Cell phones are sexy like the Playboy Mansion once was. Cell services are like the plumbing in the Playboy Mansion. They are not sexy. The Nokia phones you may read about, those are produced through another company, HMD Global, under a license derived from the old feature phone business of Microsoft Corporation (NASDAQ:MSFT).

Having Nokia out as a brand, albeit under a different company, lets Nokia the company continue to do its unsexy work under the radar. The most important point about that work is that Nokia is going Chinese, through a unit called Nokia Shanghai Bell, in which it will own 50% plus one controlling share.

The “exclusive platform” in China will let Nokia turn out gear combining its patents with the low costs for engineering available in Shanghai, so it won’t get beat on price as the world moves toward 5G service, the next big step in mobile internet service.

Nokia Burying the Hatchet With Apple

Meanwhile, while the Supreme Court was laying down the hammer on patent trolls, moving such suits from Trumpistan to Techland, Nokia cleverly buried the hatchet with Apple Inc. (NASDAQ:AAPL) over the patents that had upset this writer.

The deal gets Nokia some cash and some infrastructure sales, plus it gets its own digital health products, previously sold under the Withings brand, into the Apple stores. The two companies also agreed to regular meetings to keep each other on track.

The new relationship means a lot more than the cash, expected to be something under $500 million. That may be a good bump in whatever quarter it lands in, but it’s still just 10% of any quarter’s take, and it’s a one-time payment. Don’t get too excited.

The relationship, however … now you’ve got a company that can match any rival on costs for gear, thanks to Shanghai, with an interesting play in health alongside Apple, enough hype to keep the company going until carriers file orders for the 5G gear they’ve been hyping with customers for months.

The Gear, The Gear

It’s that gear that investors need to stay focused on.

It’s the gear where the big sales numbers will come from, and the gear where the profits will come from. That gear is still in the lab, and on the show floors of trade shows. It is likely to remain there for a few years, while carriers sell the sizzle of 5G to raise money with which to buy the steak.

When the orders come in, that’s when you want to be in Nokia stock. Until then, avoid it.

Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in MSFT and AAPL.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Tweet him at @danablankenhorn, connect with him on Mastodon or subscribe to his Substack.


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