Nokia's share price has continued to decline. The mobile phone manufacturer reached its deepest valuation since 13 years. The fundamental worth of Nokia is significant higher than the market valuation on the stock exchanges. An acquisition by Microsoft (MSFT, Financial) is denied.
The stock market decline of the mobile phone manufacturer Nokia (NOK, Financial) seems to have no end. On Friday, the stock price of the world market leader continued its sell off after the share had already lost 18 percent of its value since the beginning of the week.
(Source: Finviz.com)
Since 2007, the year of the introduction of Apple's iPhone (AAPL, Financial), the market capitalization fell by around 75 percent. The slump this week was caused by revised business forecasts. The world leader has lowered its forecasts for the second quarter and pulled back its forecasts for the entire year.
Experts count that a spin off of the mobile company would create a bigger shareholder value. The financial agency Bloomberg expects that Nokia would be 52 percent more worth in the case of a split. By separating the areas of mobile phones, infrastructure equipment, mapping software and finally the accounting of Nokia patents, the company could be worth USD 39 billion. Reviews for comparable companies were used for these thoughts. The market capitalization is currently moving to the mark of 25 billion dollars. Nokia is currently valuated with a multiple of 3.45 of the EBITDA, calculated on 2010 full year figures. Thus, the share of Finns is much cheaper than the share of the ten largest telecom equipment suppliers, which have an average price to earnings ratio of 8.7.
Interested parties in parts of the mobile phone group could be competitors like Samsung and HTC. Even Microsoft, Nokia's partner in view of the new operating system Windows Mobile Phone, is listed again as a potential contractor. The last and promptly denied rumor is: Microsoft wanted to buy Nokia's mobile phone division for 19 billion dollars.
Within the financial society, a spin off would be appreciated, especially due to the fact that investors alone have lost this year a lot of money with their Nokia investment. It's a classic situation where the parts are worth more than the entire company. The clock is ticking. Nokia is a good brand, but a lame brand, and they must do something to fight against a hostile takeover. Years before, there were some suppliers that considered a buy. Now the time has come to take a closer look at Nokia.
Meanwhile, CEO Stephen Elop said that they never had discussed an acquisition with Microsoft. For the circulating rumors, there is no basis. "We have a great plan for the future, and we are focused on it to carry out this plan, "he said. The plan is to gain lost market shares in the lucrative smartphone business. This should happen with Microsoft's mobile operating system, Windows Mobile. Nokia wants to equip its future mobile phones with this version. The change, however, can shrink Nokia's business further.
After the published new revenue and profit forecasts, sales from the division "Devices & Services", that includes the core mobile phone business, are now well behind the earlier announced target range of EUR 6.1 to 6.6 billion. The operating margin will significantly fall behind the old forecasted range of 6 to 9 percent. Now, the range should be close to the break-even point. A dynamic environment, increasing competitors as well as market trends in Europe and China are reasonable for these developments. Who has the courage to invest now?
Related Tickers:
AAPL, NOK, MSFT
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