Say it ain’t so. In a recent speech, U.S. Attorney General, William Barr floated an idea to battle the ongoing question of how do you solve a problem like Huawei? The idea was for the United States to take a controlling interest in Nokia (NYSE:NOK) or Ericsson (NASDAQ:ERIC). Or how about this, both?
Teddy Roosevelt must have been rolling over in his grave shouting “What in the name of Andrew Carnegie is going on here?”
Would the U.S. government engage in a bizarro display of reverse trust busting. The answer is no said Vice President Mike Pence and the White House’s chief economic advisor, Larry Kudlow. Kudlow went so far as to say, “(the) “U.S. government is not in the business of buying companies, whether they’re domestic or foreign.”
However, that speculation was one of many rumors that gave NOK stock a lift in January. And as a result of the administration’s dismissal of the rumor, investors are dismissing NOK stock. However, to be fair, the idea of the United States engaging in corporate socialism should have been enough to send investors fleeing.
Huawei Still a Problem For Nokia
The state-run Chinese company is the world’s leading provider of fifth generation (5G) mobile internet hardware.
The United States is accusing Huawei and several of its subsidiaries of efforts to misappropriate intellectual property from U.S. technology companies as part of a systematic effort to grow and operate Huawei’s business.
As the 5G infrastructure begins to get built throughout the world, the United States was hoping it could count on the United Kingdom and Europe to prohibit Huawei gear from being used during the build out phase. But the British government announced in January that it would not prohibit Huawei and the European Union has given the same indication.
But whether or not, Huawei is actively involved in taking steps to steal intellectual property is not Nokia’s concern. Huawei represents low-cost competition. And with Ericsson already in the field, Nokia already has enough of that.
Nokia Continues to Be Tied To Takeover Rumors
After the White House rejected the notion of a government takeover, Nokia continued to be the topic of takeover rumors. One rumor suggested that Nokia and Ericsson would merge. Another suggested that perhaps a company like Apple (NASDAQ:AAPL) would enter into a strategic partnership of sorts with the company.
And it’s possible that the United States may yet broker a deal between Nokia and another private sector company using tax incentives as a juicy carrot.
Either way, it seems that the message for investors is clear. Without some form of assistance, Nokia is not investable. And that message is playing out in the NOK stock price. The stock is down nearly 40% in the last 12 months and is essentially flat for 2020.
With Friends Like These…
Nokia finds itself in the middle of business and politics. And it’s on the wrong side of both. I’m not suggesting that the U.S. government’s battle with Huawei is not worth fighting. It absolutely is. But it’s unclear how a government takeover of Nokia or Ericsson or both would do anything to alleviate those concerns.
And that leaves Nokia in a predicament. As my InvestorPlace colleague Vince Martin points out, NOK stock is a bargain right now. And the stock price is even lower since Martin’s article. However, as Martin also points out the stock’s bullish thesis is dependent on a story that investors have heard before. And Tom Taulli wrote that Nokia’s own guidance suggests their revenue growth is expected to be essentially zero in 2020.
I would suspect Nokia will get a look from traders. But right now there is not catalyst to move it higher. And without that, it looks like more of the same for NOK stock.
As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.
