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Nokia Is Playing Well

November 14, 2013 | About:
muhammadbazil

Muhammad Bazil

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Nokia (NOK) is launching its new handsets and tablets which will be much faster and unique compared to the models already in the market. According to Nokia Power House, the company is going to launch Lumia 2020 and Lumia 1820 at MWC 2014. Nokia Lumia 1820 is different from Nokia Lumia 1520 due to its thin metallic uni body and lytro camera and is imaged to be Nokia’s next flagship device. It is speculated that after the Nokia-Microsoft deal, this phone will be the first Microsoft smart phone. With the help of this Lumia series, Microsoft (MSFT) will unveil its first smart phone having its own brand name instead of Nokia.

Nokia is also going to set its name for 8-inch tablets by launching Lumia 2020 that is much faster than Lumia 2520 having 800 snapdragons processor in it. This 8-inch tablet will have 1080 resolution display with stylus support and higher PPI display.

After its deal with Microsoft, the company is left with a mapping software unit, Nokia Solutions and Networks (NSN) and a portfolio of its patents and is doing very well. To improve margins, the company’s telecom equipment unit, Nokia Siemens Network, is now focusing on expanding sales by cost trimming strategies and ditching unprofitable contracts. After selling its loss-making handset business to Microsoft, Nokia Solutions and Networks (NSN) unit is now leading the Finnish Company. Aggressive restructuring plans, workforce trimming and ditching of unprofitable contracts have made NSN a leading candidate to head Nokia.

Nokia and Alcatel-Lucent Combination

Alcatel-Lucent SA (ALU), a French company, is looking for a buyer to sell its switches and communications division as an effort to shed assets worth $1.6 billion by 2015. This is due to the fact that the company’s Chief Executive Michel Combes is running a debt reduction plan and looking for potential corporate clients with the help of Lazard Ltd. The company has a market cap of $8.18 billion and is priced at $4.60 (as of this writing on Nov. 14, 2013) with a gain of 176.87%.

Due to NSN’s improved finance and cash, Nokia is planning to buy its French competitor Alcatel-Lucent’s wireless network equipment unit for $2.7 billion. In a telephonic interview, Nordea Bank’s analyst Sami Sarkamies has made a statement about this deal, saying, “This deal makes complete sense” and that “Nokia will have the financial flexibility to do this kind of deal and Alcatel needs to slim down. There is a relatively high likelihood of this deal happening.”

Hannu Rauhala, an analyst at Pohjola Bank, Helsinki, is pointing to Nokia’s acquisition of Alcatel wireless assets a smart move for both of these companies, saying, “Nokia will certainly have the firepower to do both M&A and resume its dividend. If Nokia pays around 2 billion euros for the Alcatel wireless assets and keeps a healthy balance sheet to keep carriers’ confidence, they would still have enough cash to pay a dividend of up to 40 cents. The deal would be a smart move for Nokia and its investors.”

After the Nokia-Microsoft deal is completed, the Finnish company will earn $7 billion while it already has about $10 billion in cash with $6 billion of total debt. After the deal, the company’s cash pile will certainly be raised to $17 billion which makes Nokia’s acquisition of Alcatel-Lucent’s wireless units more certain.

Given the fact that Alcatel-Lucent is slimming down, Nokia will have the financial capability after completion of its deal with Microsoft. Nokia’s shares plunged to $4 to $5 right after Microsoft purchase and currently its shares are trading at $7.94 with an increase of 19.4% in a month. Nokia’s acquisition of Alcatel-Lucent will increase Nokia Solutions and Network shares in global wireless market from 18% to 30% and this is what the investors are waiting for.

Conclusion

Nokia-Alcatel-Lucent is a huge opportunity for the Finnish company as the U.S. is considered to be the largest smartphone and wireless market in the world while Nokia has no share there except T-Mobile. This acquisition will help Nokia to set a much-needed footprint in wireless business in one of the world’s largest wireless markets. It’s a BUY.

About the author:

Muhammad Bazil
Muhammad Bazil is a financial journalist and editor for a variety of websites, public policy organizations, and book publishers. He has written hundreds of published articles and blog posts on topics including budgeting, credit management, real estate and investing. His articles have been featured on the homepage of Yahoo!, MSN and numerous local news websites.

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