Investors who take a good, hard look at Nokia (NYSE:NOK) will see a historic technology company that just hasn’t delivered for its backers. NOK stock continues to disappoint.
It doesn’t matter that this company has been around a long time. Or that Nokia adapted to the market and made cutting-edge products that were embraced by consumers.
Although the company offers a welcome counter to China’s influence in 5G technology, it is falling short as a long-term investment.
Now investors must decide whether this fairly affordable and established tech company deserves our patience.
I think it does – for now.
NOK Stock at a Glance
Nokia’s roots can be traced to 1865 making products from wood and then rubber. That willingness to evolve continued and the company prospered.
During the 1990s, Nokia was a dominant provider of cellular phones until Microsoft (NASDAQ:MSFT) acquired its phone division. From there, Nokia has made components for the smartphones of today and other new communications technology.
Performance of Nokia stock, however, is not a pleasant story.
In the 1980s, NOK stock was selling for $50 per share. While this is small potatoes compared to leading technology stocks, it’s not too shabby. In fact, it looks pretty good in comparison to current prices hovering around $4 per share.
This somewhat anemic price has been the case for a while. Over the last year, Nokia stock ranged from a low of $2.34 to a high of $5.14.
Admittedly, moves of a dollar here or there will bring a smile to the investor who is playing a stock’s short-term swings. But this is not the kind of performance long-term investors look for to build their nest eggs. For that reason, NOK stock is not suited for a long-term portfolio.
My InvestorPlace colleague Will Ashworth makes this point well in his recent article on Nokia. Interestingly, he says a $1,000 investment in Nokia nine years ago would produce $1,000 today – including dividends.
Investors Need Patience and Awareness
Nokia has a knack for rolling with the punches and surviving an often brutal segment of the market. Technology companies face a constant demand to produce relevant goods and correctly anticipate future needs. Those that are publicly traded also must keep investors happy.
But Nokia is threatened by fierce competition in the 5G arena. The company must quickly recalibrate.
Nokia welcomed a new CEO in August. Pekka Lundmark faces a challenge to remake a global company into a force for the tech world’s future. Lundmark is not a newcomer to Nokia, having worked an as executive there during the 1990s.
He also has a wide range of experience in other areas, including venture capital, energy and the heavy-equipment industry. Hopefully, this diversified experience gives Lundmark the ability to see beyond Nokia’s hallways and reposition the company to push out of its persistent slump.
Lundmark is already shaking things up at the company. There has been turnover at the executive level and likely more is on the way. He sees the company having four divisions that he hopes will enable better oversight. Each division will be responsible for success and profit. And Lundmark intends to be aggressive about restoring Nokia’s leadership in 5G products and services.
During a recent earnings call, Lundmark spoke of a “turnaround mindset,” adding, “We want to develop internally a culture of openness in both good news and bad news so that management can get accurate information about what is going well and what is not going well.”
Lundmark is expected to further outline his plans for the company on Dec. 16.
The Bottom Line on Nokia
Nokia is a large technology company based in Finland that evolved from making products from wood and rubber to providing cutting-edge technology goods and services. The company was resilient while buffeted by competition and changing markets. It withstood management that missed the mark for investors.
However, Nokia stock is an underperformer, especially for long-term investors. Its shares failed to keep up with the performance of its products.
With a new CEO promising to reinvigorate the company, investors are watching with interest. We’ll see what Pekka Lundmark has in store later this month.
On the date of publication, Larry Sullivan did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Larry Sullivan is a veteran journalist in Florida who has covered banking and finance for several years. He is a former investing editor at U.S. News & World Report in Washington D.C.