brnichols

brnichols
Contributor since: 2012
Since this comment section is so long you probably didnt get a chance to see my previous comment to which this was a follow up;
"Upside of this stock is tremendous as all analyst upgrades and improved price targets fail to accurately value the patent portfolio and to a lesser extend here & location services.
Take the most widely quoted valuation; JP Morgan's "Sum of the parts" analysis which can be seen here; http://bit.ly/17Ucgo2
They place a value of 5.6 billion euro or $7.4 billion on the patent portfolio and many have called this a "high" estimate but in reality JP (like so may other analysts) is grossly undervaluing this asset. This estimate is based on "the Nortel precedent" which assumes that Nortels price per patent in its 2011 auction was $750,000; however, this is grossly inaccurate if you consider that only 2000 of the 6,000 Nortel patents acquired were still in force ie had any of its 20 year enforceable term remaining, thus the price per enforceable patent paid was approximately 2.25 million. Given its young portfolio, Nokia has about 8,000 enforceable patents in its 10000+ portfolio which would make the portfolio worth 18 billion using the "Nortel precedent." $10.6 billion more than the JP morgan valuation which would push their price per share estimate from $7.69 to $10.36. However, this is still an undervaluation because one must take into account quality of the patents in each portfolio; several studies done by IP valuation firms have all found that Nokia's portfolio contains significantly more patents considered novel or seminal (top 5% of all patents based on innovation and demand) to the 3G and 4G technologies; Nokia leads the industry in ownership of all patents considered seminal to 3/4g, at 10-18% depending on the study. While Nortel's portfolio contained just 1-2% of these seminal patents. Thus, Nokia's patent portfolio contains 5 to 9x more high quality integral patents than Nortel's. Combining this "quality" multiple with the previous $10.6 billion value based solely on volume, you would arrive at a total valuation of over $50 billion for Nokia's patent portfolio when using the Nortel auction prices as a proxy.
Currently, all these analyst upgrades are simply a reaction to the unexpected sale, these analysts have very little clue or desire to accurately value these patents. However, as royalties continue to poor in they will begin to up these estimates, pushing the stock to highs not seen since 2010."
This revision supports my theory that these analysts have little knowledge of how to properly value patents. To this end, it means that the upside potential of this stock is much greater than initially reported after the MSFT deal...
And as for this point "Basically, the only thing you can take from this with any confidence is that a successful IP-focused strategy might earn Nokia a bunch of extra money, which could then cause their share price to rise a lot at some point. All the rest is going to be an exercise in precision without accuracy." All investments are precision without accuracy and for a stock that trades for under $8, the potential of this added IP value is worth the risk for most investors.
According to a Friday Valuewalk article, the JP Morgan analysts have already updated their analysis, due to the "realization" of tremendous patent value.
"The firm’s European Communications Technology team and Communications Equipment and Data Networking team released a report highlighting places where they see Nokia could generate additional value. Their findings suggest that if the company adopted a strategy focused on intellectual property with a royalty of 1 percent per handset, then its stock could be worth between €10 and €15 by 2018. They even see additional potential depending on just how much cash Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) could generate before then. They suggest that if Nokia grows its IP revenue, its multiple could go as high as Qualcomm was in the early 2000s."
@asifruman, I have completed an updated and revised analysis of the patent portfolio valuation following the Microsoft deal and may post in the recent future if I can get some assurances from SA management that they will deal with any outright plagiarism of the article, something that was rampant in the weeks and months following the publication of this analysis yet despite repeated requests to SA they had no interest in taking action which was extremely frustrating.
That said, I did post a brief analysis in the comment section of another article regarding the current patent valuations that have accompanied recent analyst upgrades:
Upside of this stock is tremendous as all analyst upgrades and improved price targets fail to accurately value the patent portfolio and to a lesser extend here & location services.
Take the most widely quoted valuation; JP Morgan's "Sum of the parts" analysis which can be seen here; http://bit.ly/17Ucgo2
They place a value of 5.6 billion euro or $7.4 billion on the patent portfolio and many have called this a "high" estimate but in reality JP (like so may other analysts) is grossly undervaluing this asset. This estimate is based on "the Nortel precedent" which assumes that Nortels price per patent in its 2011 auction was $750,000; however, this is grossly inaccurate if you consider that only 2000 of the 6,000 Nortel patents acquired were still in force ie had any of its 20 year enforceable term remaining, thus the price per enforceable patent paid was approximately 2.25 million. Given its young portfolio, Nokia has about 8,000 enforceable patents in its 10000+ portfolio which would make the portfolio worth 18 billion using the "Nortel precedent." $10.6 billion more than the JP morgan valuation which would push their price per share estimate from $7.69 to $10.36. However, this is still an undervaluation because one must take into account quality of the patents in each portfolio; several studies done by IP valuation firms have all found that Nokia's portfolio contains significantly more patents considered novel or seminal (top 5% of all patents based on innovation and demand) to the 3G and 4G technologies; Nokia leads the industry in ownership of all patents considered seminal to 3/4g, at 10-18% depending on the study. While Nortel's portfolio contained just 1-2% of these seminal patents. Thus, Nokia's patent portfolio contains 5 to 9x more high quality integral patents than Nortel's. Combining this "quality" multiple with the previous $10.6 billion value based solely on volume, you would arrive at a total valuation of over $50 billion for Nokia's patent portfolio when using the Nortel auction prices as a proxy.
Currently, all these analyst upgrades are simply a reaction to the unexpected sale, these analysts have very little clue or desire to accurately value these patents. However, as royalties continue to poor in they will begin to up these estimates, pushing the stock to highs not seen since 2010.
Dan Hoffman, thanks for the kind words, glad you enjoyed the analysis. In regards to my personal positions on the stock, I was fortunate to purchase a substantial number of otm Jan 14 calls a few weeks after the article was published and the stock went sub $3.00 and needless to say the return has been huge. Also have alot of happy friends/family members who I advised to open a position in Nok.
Well, I did not just pull these figures out of hat and its not just conjecture after the fact. I have been bullish on the untapped patent value of Nokia since last Summer when the stock was near all time lows; my analysis can be read here; http://seekingalpha.co....
Most of my conclusions have proved right and it appears that other analysts, the vast majority of whom dismissed these claims of patent value, are now beginning to realize its profit potential. The next step is for mainstream analysts to learn proper patent valuation at which point the stock will skyrocket.
Upside of this stock is tremendous as all analyst upgrades and improved price targets fail to accurately value the patent portfolio and to a lesser extend here & location services.
Take the most widely quoted valuation; JP Morgan's "Sum of the parts" analysis which can be seen here; http://bit.ly/17Ucgo2
They place a value of 5.6 billion euro or $7.4 billion on the patent portfolio and many have called this a "high" estimate but in reality JP (like so may other analysts) is grossly undervaluing this asset. This estimate is based on "the Nortel precedent" which assumes that Nortels price per patent in its 2011 auction was $750,000; however, this is grossly inaccurate if you consider that only 2000 of the 6,000 Nortel patents acquired were still in force ie had any of its 20 year enforceable term remaining, thus the price per enforceable patent paid was approximately 2.25 million. Given its young portfolio, Nokia has about 8,000 enforceable patents in its 10000+ portfolio which would make the portfolio worth 18 billion using the "Nortel precedent." $10.6 billion more than the JP morgan valuation which would push their price per share estimate from $7.69 to $10.36. However, this is still an undervaluation because one must take into account quality of the patents in each portfolio; several studies done by IP valuation firms have all found that Nokia's portfolio contains significantly more patents considered novel or seminal (top 5% of all patents based on innovation and demand) to the 3G and 4G technologies; Nokia leads the industry in ownership of all patents considered seminal to 3/4g, at 10-18% depending on the study. While Nortel's portfolio contained just 1-2% of these seminal patents. Thus, Nokia's patent portfolio contains 5 to 9x more high quality integral patents than Nortel's. Combining this "quality" multiple with the previous $10.6 billion value based solely on volume, you would arrive at a total valuation of over $50 billion for Nokia's patent portfolio when using the Nortel auction prices as a proxy.
Currently, all these analyst upgrades are simply a reaction to the unexpected sale, these analysts have very little clue or desire to accurately value these patents. However, as royalties continue to poor in they will begin to up these estimates, pushing the stock to highs not seen since 2010.
Upside of this stock is tremendous as all analyst upgrades and improved price targets fail to accurately value the patent portfolio and to a lesser extend here & location services.
Take the most widely quoted valuation; JP Morgan's "Sum of the parts" analysis which can be seen here; http://bit.ly/17Ucgo2
They place a value of 5.6 billion euro or $7.4 billion on the patent portfolio and many have called this a "high" estimate but in reality JP (like so may other analysts) is grossly undervaluing this asset. This estimate is based on "the Nortel precedent" which assumes that Nortels price per patent in its 2011 auction was $750,000; however, this is grossly inaccurate if you consider that only 2000 of the 6,000 Nortel patents aquired were still in force ie had any of its 20 year enforceable term remaining, thus the price per enforceable patent paid was approximately 2.25 million. Given its young portfolio, Nokia has about 8,000 enforceable patents in its 10000+ portfolio which would make the portfolio worth 18 billion using the "Nortel precedent." 10.6 billion more than the JP morgan valuation and this is based on sheer volume of patents but if you take into account quality of the patents in each portfolio, Nokia's patents are worth several multiples more than Nortel's. Take a look at my lengthy analysis of Nokia's patent portfolio published last Summer for an idea of just how innovative and novel it is compared to the rest of the tech community.
Currently, all these analyst upgrades are simply a reaction to the unexpected sale, these analysts have very little clue or desire to accurately value these patents. However, as royalties continue to poor in they will begin to up these estimates, pushing the stock to highs not seen since 2010.
Nice article Ash, i hope to see more similar ones holding fund mangers/analysts accountable in order to stop similar devastating losses in the future!
@Tedlujan
Heres an article from this past July in which I delve into the potential value of emerging markets specifically India/Asia, enjoy!
http://seekingalpha.co...
Still Not as bad as The recent Trefis article (http://seekingalpha.co...) on Nokia patents which copied three of their five paragraphs from my Nokia article (http://seekingalpha.co...):
Here’s my favorite Example:
“What makes Nokia’s patent strength even more more intimidating is that Nokia and Qualcomm had entered into a 15-year patent licensing agreement in 2008, which basically gave Nokia access to all of Qualcomm’s patents for use in its mobile phones. This essentially translates to unrivaled access to more than 30% of the essential LTE patents – a position of strength that not only insulates Nokia from litigation in the ongoing patent war, but also gives it enough ammunition (with its 19% LTE patent share) to go after rivals and generate cash through licensing deals.”
“This substantial position in LTE holdings is even more remarkable when the following revelation found in the footnotes of the Nokia 2011 annual report is considered, "In 2008, Nokia and Qualcomm entered into a new 15 year agreement, under the terms of which Nokia was granted a license to all Qualcomm's patents for the use in Nokia mobile devices and Nokia Siemens Networks infrastructure equipment." Thus, the company has complete access to an unrivaled 31.4% of the essential LTE patents, a fact that will undoubtedly save Nokia a significant amount of time and money in the coming years as the patent litigation war which has raged in the past shows no sign of letting up. The following graph depicts the distribution of these essential 4G/LTE patents among Nokia and its various competitors.”
Pretty sure I wrote this article 6 or 7 months back...http://seekingalpha.co...
Your Thesis:"For the rest of the world, however, in places where the 3G rollout is a big deal - think Thailand, Indonesia, India and China - Nokia is in a different place because the market is so completely different than it is here in the States."
Very similar to mine except You do not substantiate the 3G claim at all (Which I did as an original thought an intext citation would be nice, research takes time) and Your addition of Thailand and China is quite laughable considering that Nokia has very little market share in either country, the future of Nokia is Not China its Africa/latin America, if you did some research you would know that.
My favorite quote, "Across Asia, a significant portion of the market carries both a smartphone and dual-SIM Nokia candy-bar burner phone to make/receive important calls on because, as a phone, Nokia is virtually without peer." In India they have dual sim Nokia phones that does not mean all of Asia has one.
I completely understand, discipline and conviction are the most important thins when it comes to investing, making a plan and sticking to it may result in a few missed opportunities nut more often than not it save retail from more rushed mistakes than they can even fathom. That said, i just wanted to let everyone know as the technicals are lining up for an outside shot at hitting 5 today at which point it is poised to run due as much to the non-institutional investors aware of this and jump in pushing the stock.
Did not not see another big day like this coming but it appears to be approaching that all important $5.00 which will open the stock to the many institutional investors that cannot trade stocks below $5, thus be advised that the stock will quickly rise toi the 6 or 7 level once 5 is reached so if anyone wants to get back in now is the time to think about it...
Thanks for the kind words, glad you enjoy the research.
-And its going to be 4 separate parts as i finally just decided to stop fighting it and just oblige the SA editors haha
It seems pretty obvious to me that they made a strategic decision to announce early because this announcement while impressive when you consider where Nokia was, would be lost during January earnings when as a few companies will have inevitably capitalized on Christmas demand leading to an earnings report that blows Nokia out of the water.
As an ardent Nokia supporter I published a set of research reports on the upside of Nokia during this past summer/early fall when the stock had become oversold to a ridiculous extent. Here are the links for those that did not get a chance to read my analysis; http://seekingalpha.co... and http://seekingalpha.co.... e
To summarize, the company holds a patent portfolio that is truly industry leading as it trails only Microsoft in total number of issued patents yet surpasses Microsoft and all others by a large margin when it comes to strategic importance and technological innovation. This is apparent in the fact that Nokia holds approximately 19% of all patents considered essential to mobile 4G/LTE technology. The ability of Nokia to maintain such a consistently high success rate while asserting and defending claims against multiple competitors for a variety of different technologies in numerous continents shows the true dominance of their patented technology. Annual IPR revenue will be about $600, despite this significant amount of free cash flow, the staggering truth is that patent monetization was not a major emphasis of Nokia management until recent quarters when Elop began to push active monetization of the patent portfolio. To this end, the first major manifestation of this approach was the lawsuit filed against Rimm, Viewsonic and HTC which in May 2012. The IPR revenues resulting from the settlement if these suits will begin to materially impact revenue by Q4 of this year and combine that with the potential of licensing settlements for the other major Android manufactures and annual IPR revenue could very easily surpass $1 billion by early 2014.
And while many investors would rather not fathom this situation, if the Nokia turnaround proves to be short-lived and in a worst case scenario Nokia approaches bankruptcy, it seems plausible that Nokia would follow the path of Nortel/Motorola and sell their patents to the highest bidder in an auction based sale. In such an event, it would appear that in n identical auction setup with the same companies bidding on the patents, Nokia garner substantially more than Nortel (4.5) or Motorola (5.5) as its portfolio is sustainably superior in every conceivable valuation metric, it seems plausible to assume that at the very least Nok would sell for the 4.5 garnered by Nortel however, even in such a discounted scenario investors must remember that 4.5 is a substantial floor for a company with a market cap of only 12 billion.
Very briefly, the second article deals with my assertion that most many mobile markets outside if the US and UK are still in their infancy and as such feature-phones will continue to make up a majority of device sales in such places. In particular, I focus on gigantic opportunity this allows Nokia in India which is the world’s second largest mobile market and due to a variety of factors from a lack of complete lack of mobile centric infrastructure to extremely low per capita income, the majority of users have no desire in smartphones as evidenced by the prevalence of the feature phone which still makes up 90% of units sold.
As some of you may remember, I mentioned that Navteq and the mobile mapping market encompassed my third and final area of upside for Nokia and as such I had completed a rather detailed article on the subject about two weeks after I published the patents article but after having it sent back multiple times by SA editors do to length restrictions I became pretty annoyed and decided that I would return to it at a later date. However, this plan changed after the Apple-Maps debacle which convinced me that mobile mapping was a lot more complicated than I originally surmised and since very little reliable research exists regarding the complex processes that underlie these services. I have spent a good amount of time researching the entire process from the ground up and attempting to provide analysis in what was supposed to be a 2K-4K word article but became a 22K word document packed with data and findings which lead to the conclusion that Navteq maps is poised to bring back the glory days of Nokia. Hoping to have it published by Monday market open Monday but who knows with SA sometimes!
If it wasn’t obvious, I would advise you to hold the stock as the upside is astronomical!
exact quote from my article:
"This industry leading quality is clearly apparent in a review of the 3,144, 4G/LTE patents considered essential to the application of the technology (as of November 2011) performed by the research firm Article-one Partners in collaboration with Thomas Reuters which found that as of Q4 2011, Nokia held 18.9% of the total essential 4G/LTE patents in circulation. This substantial position in LTE holdings is even more remarkable when the following revelation found in the footnotes of the Nokia 2011 annual report is considered, "In 2008, Nokia and Qualcomm entered into a new 15 year agreement, under the terms of which Nokia was granted a license to all Qualcomm's patents for the use in Nokia mobile devices and Nokia Siemens Networks infrastructure equipment." Thus, the company has complete access to an unrivaled 31.4% of the essential LTE patents, a fact that will undoubtedly save Nokia a significant amount of time and money in the coming years as the patent litigation war which has raged in the past shows no sign of letting up. The following graph depicts the distribution of these essential 4G/LTE patents among Nokia and its various competitors."
looks pretty similar to the 3rd/4th paragraph in this "original," article which reads,
"[1] Even in terms of quality, Nokia’s patents stand out. In a 2011 review of the 3000+ patents considered essential to the LTE technology that is quickly emerging as the preferred 4G standard, Thomson Reuters and Article-one found that Nokia held close to 19% of the standard essential LTE patents and was the LTE leader by a big margin. [2] Qualcomm (QCOM), the dominant mobile chipset manufacturer, trailed Nokia with a share of about 12.5% of the LTE patents deemed essential.
What makes Nokia’s patent strength even more more intimidating is that Nokia and Qualcomm had entered into a 15-year patent licensing agreement in 2008, which basically gave Nokia access to all of Qualcomm’s patents for use in its mobile phones. This essentially translates to unrivaled access to more than 30% of the essential LTE patents – a position of strength that not only insulates Nokia from litigation in the ongoing patent war, but also gives it enough ammunition (with its 19% LTE patent share) to go after rivals and generate cash through licensing deals."
Trefis please give credit where it is Due, it takes time and effort to produce these articles on my own!
Pretty appalling that Trefis has decided to steal my research for this article without giving me any credit at all.
Microsoft pays 250 million a quarter to help defray the costs of subsidy and marketing
Hymanbaum,
I could not agree more, it always frustrates me when investors in the US/Europe routinely fail to see that foreign markets do exist.
I wrote about Nokia dominance in India a few months back if ur interested.
http://seekingalpha.co...
Efsinvestment,
Thanks for the article, I have often pondered what will happen to Google/Android platform in the coming years. The Samsung ruling marked the 16th time a case involving infringement by an Android manufacturer/operator has settled. At some point the "free" open platform will begin to cost these companies a comparable amount to other platforms.
I will agree that Elop isnt steve jobs (lacks any charisma at all) and thus the presentation could have went better, the point of these events is tomake a product known to the world and that product is surprisingly amazing. Not just the camera but the entire product as a whole. This was after working with Microsoft for a less than a year, imagine what they will be able to come out with in the future!
Luke,
To be honest, I kind of figured that Nokia would continue to put iut underwhelming Smartphone devices and the segnment would provide little to the bottomline as it has for the past few years. It was the patents, featurephone dominace in third-world countries and mapping technology (I have been waiting for Friday, following the Amazon Kindle release to publish my mapping & navigation findings) that would provide future success for Nokia. Thus, I have spent little time even considering their smartphone products and dont have much information on it, I will look into the VZN question and get back to you in the morning though. But what I can tell you is that this completly unexpected news of a smartphone product that can compare with the iphone is very encouraging even if the product doesnt have a large impact on profits as it clearly shows that ELOP and co can successfully design and peoduce a technologically superior product which is something that the past mangement has been unable to do for years, yet this management team was able to do in 16 months, its a very positive sign that things are heading in the right direction.
These are my two favorites, both from reputable tech sites. Cant believe some of the people calling this release a, "fail," unequivocally the products are amazing!
http://bit.ly/QmrfQK"We've already seen the best Android has to offer, and the Lumia 920 is just as responsive and fast as the Galaxy S III and HTC One X. We're waiting on the next iPhone, but from what we know so far, this phone will be able to go toe to toe with Apple as well. "
http://engt.co/NSw4gL. "And, can we just say that Windows Phone 8 is a an absolute pleasure to use. At the risk of angering quite a few people -- there's simply no mid-range Android phone or iOS device that's as quick and satisfying to use as the Lumia 820, and much of that is thanks to the highly optimized Microsoft OS. "
I would advise that you simply purchase sum out of the money close to experation puts to protect your substantial long position, the stock is so cheap that buying and re-selling repeatedly over the short-term will erode any profits as transaction costs will eat u up.
@Krulwich, thank you very much for the data and research report sir, the data you provided was vital to the completion of this article. I cannot thank you enough!
Well Thank you for the vote of confidence Dr., the goal of any true analuyst is to put out unbiased well-researched information that investors are willing to act on, so its very nice to learn that I have accomplished this in regards to your investing activity!
And please keep the anti-Nokia sentiments that you hear or read from CNBC and your broker coming, this type of information only drives me to work harder and find more facts to support my claims! The "establishment," gets a little riled up when someone from the outside uncovers certain previously privied research.
http://bit.ly/PM6iwv wrong link this is a discussion about recent analyst upgrades of Nokia, remember where you heard it first!
@WhatdoIknow
Yes this is just about a quarter of my research, I have about 4 to 5 more articles on the long-term profitablibilty of Nokia! So stay Tuned!
http://bit.ly/RRUmPk remember where you heard it first!