Below is a calculation of the sum of Nokia's parts:
Nokia-Siemens: $6.0 billion
Patents: $7.7 billion
Navteq: $5.0 billion
Net Cash: 6.3 billion
Total: $25 billion
Current Market Cap: $13.2 billion
But Nokia Is Still Losing Money
This is true -- Nokia is still not operating at a profit. However, the cash losses per quarter are roughly $200 million. It would take a long time for NOK to wipe out its net cash of $6 billion. Right now the business is worth 100% higher than the current valuation of the company based on the above sum of its parts. If you assign a 25% discount to patents/Navteq and assume it loses $2 billion more restructuring the business, you still get $20 billion, which is 50% higher than the current market cap.
What About the Smartphone Business?
I always believe it's important to be extremely conservative in your calculations of the valuation of a company, because a variety of things can go wrong at any time and you want to make sure that you are buying something with a huge margin of safety. To this end, I have assigned $0 valuation to the smartphone division with good reason.
Nokia's market share in this segment has fallen from third overall to seventh. While Microsoft has put a lot of marketing muscle behind Windows 8, I still believe its safe to assume no value to this division. Any traction in this segment will only add more value to an undervalued stock.
In conclusion, I believe NOK is conservatively worth 100% more than what it is currently trading at. This valuation assumes significant write-downs in all segments of NOK's business. I believe analysts and the investment community are too focused on its cell phone business, which now is only a small part of its overall business. Instead, investors should focus on the sum of NOK's parts. Then they will realize how cheap it is.