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Nokia Corporation Message Board

  • investora2z investora2z Oct 6, 2013 6:42 AM Flag

    Better for long term

    The announcement of the purchase of device unit of Nokia by Microsoft (MSFT) has changed the fortunes of the company. The stock has surely moved swiftly to factor the cash offered by Microsoft, and there are analysts who are upbeat about the long term prospects of the company after the deal. In addition to the cash, which will be a major portion of the market cap of the company, the sale of the loss-making unit will have other positive effects. An article on seekingalpha mentions that the sale of the unit will improve the financials significantly and strengthen the balance sheet. In any case nothing great was expected from the unit with competition in all segments of the handsets markets increasing substantially. The smartphone market, with players like Apple (AAPL) and Samsung (SSNLF.PK), is increasingly getting crowded with smaller, local players around the world. Even used devices are increasingly being preferred, and the resale value of Apple products is a source of competitive advantage which companies like Nokia do not possess. Usell (USEL), a company which provides a platform for buying / selling used phones, reported great growth in revenues recently. In addition, the patents portfolio of Nokia is expected to bring in revenues, and even Microsoft will pay them a substantial sum annually for the next 10 years. Other business segments like the Nokia Siemens Networks may also do well going forward. Overall, it will be a more cash rich company with the main overhang being out of the way. The perspective may take time to change, but the markets may begin to factor the long term benefits of the deal. However, the recent appreciation in the price has factored most of the short term positives. Future success will depend on how it performs in the remaining business segments. It will be interesting to see the operating results after the deal is closed.

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