Can Nokia Benefit From Amazon's Newest Initiative?

Dec. 3.13 | About: Nokia Corporation (NOK)

So, we all heard about Amazon's (NASDAQ:AMZN) new plan about how it wants to deliver packages with drones. If it can get FAA approval, this project intends to deliver packages from Amazon's fulfillment centers to the customer's home via air in less than an hour. The drone would pick up the package from one of these centers and fly towards the point of delivery, drop the package off and come back. This would work with packages that are not heavier than 5 pounds, which conveniently represents 86% of all packages Amazon sends to its customers.

Amazon's CEO Jeff Bezos said that it would take another 4-5 years of testing and improving before the product can be used but he was confident that this product could make deliveries a lot easier. So, after reading up until this point, you may be wondering what it has to do with Nokia (NYSE:NOK) and how come I haven't mentioned Nokia yet if the article is mainly about Nokia.

Here comes Nokia's part: Amazon's drones will be using some mapping and GPS technology. The technology to be used by these drones will have to be highly advanced. Not only should the drone be able to identify where a package is going, but also it will have to identify all the other drones that are in the air so that it doesn't have a collision. Nokia's mapping technology is highly advanced and it is improving even further each month. The company could provide Amazon's drones with the necessary mapping application as well as the servicing.

Since Nokia's map doesn't use data and can utilize satellite reception, it will be able to save Amazon a lot of headache. For example, Google's (NASDAQ:GOOG) mapping technology is highly dependent on data usage and I don't want to know what would happen to a drone on its way to delivery, which loses connection out of the blue. Many times people lose internet connection for a moment or two while traveling in their cars and this might as well happen to drones. Will the drone go to a wrong address if this happens? Or worse, will it crash and burn? More importantly if drones use a lot of precious data, won't it be expensive to maintain these things since Amazon would have to purchase and allocate lots of data for this alone? Nokia's mapping would solve all these problems.

Besides, Nokia could also insert some of its patented communication technologies within these drones. After all, not only drones have to know where they are going and where they are on the map, they also need to receive and send input. The employees in distribution centers will have to know where a drone is, whether a drone is in good condition or not, and if the other gets canceled or the address changes, someone will have to redirect the drone to its next destination. Since Nokia owns a lot of proprietary technologies in wireless communication, the company can probably utilize these drones with more than just mapping technology.

Finally, these drones might also want to take photos of deliveries just to ensure that they have proof of delivery in case some people claim that they never received a package even after it was delivered to them. This is another problem Nokia could address with its high-quality photo capabilities that can take clear photos from moving objects even at night when most other cameras get blurry.

Basically, Nokia can provide Amazon's drones with several different types of technologies that relate to mapping, two-way wireless communication and photography. Also, if Amazon's tests with drones turn out highly successful, many other online retailers (and maybe even some companies that engage in food delivery) will want to take part in this. At the end of the day, this can change mailing industry as we know it and Nokia should definitely look into taking advantage of this trend. I also feel the same way about the self-driving car trend that will be dominating the next decade.

When some people look at Nokia's mapping business, they see it as a useless part of the company because they see it as nothing but an online map. In fact, Nokia's HERE technology is much more than that. From package-delivering drones to sell-driving cars, the company's mapping technology will take part in many big ideas in the future. Let me give you another hint, Nokia's indoor GPS technology will allow robots to navigate within buildings such as assembly lines, hospitals or other places where they may be needed. The mapping industry is anything but mapping, it will be all about helping non-human things navigate on the roads, in buildings or above us effectively without hitting anything.

Lately Nokia's share price finally passed $8 and it continues to climb upwards. A lot of investors now expect Nokia to use its newly-founded cash in a way that will satisfy its investors. Some investors are expecting a special dividend. I don't think Nokia should do that because it won't accomplish anything in the long term other than hurting the company's balance sheet. If Nokia returns to permanent profitability, of course, it makes sense for it to bring back its regular dividends, but I don't like the sound of special dividends. After all, the stock price has appreciated by about 300% since last summer and 100% in the last couple of quarters. The investors were already rewarded nicely and they really don't need a special dividend. I would be fine with a special buyback though because this would reduce the dilution and increase the value of each share in the long term unlike a special dividend, which would bump the share price only until the ex-dividend date.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in NOK over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.