Maikelmike's  Instablog

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Graduate of Stockholm University, Masters degree in Finance, Second degree bachelor in Economics, Focusing primary on writing analysts on Telecom companies but may also on occasions provide articles on the stock market as a whole.
  • Nokia Liquid Assets Not Appreciated 0 comments
    Jan 29, 2013 7:35 AM | about stocks: NOK

    As we all know Nokia last week revealed its corporate earnings for the fourth quarter - respective for the whole year of 2012. After having reported losses for seven consecutive quarters the Finnish mobile kings were once again able to show green in the bottom.

    Despite this, the stock has fallen dramatically since the earnings call last week. After having risen with nearly 160% percent since it hit the bottom in July 2012, the stock has just in the last couple of days fallen with more than 10%. The explanations to this decline are many, as it usually tends to be. One explanation relates to the decision of not handing out any dividend this year. Although this was rather remarkable to investors - as it was the first time in its history the company had decided to not give out any dividends - it should however not come as a shock for most people knowing the company and the industry it acts in.

    The telecom industry is as we all know a highly competitive industry. Cash is therefore in this particular industry a highly competitive asset, and maybe the most important one. Cash usually enables companies to take on more risk in its operations but also to become more flexible, both in terms of marketing and innovation, something that is more important in an ever-changing telecom industry.

    Looking at the report from last quarter we see that Nokia Corporation strengthened its cash position by approximately 800 million EURO (sequentially). We also see that the group ended 2012 with a strong balance sheet and solid cash position. The gross cash was 9.9 billion EUR and the net cash was 4.4 billion EUR.

    This news has somehow been disregarded by the stock market. The company strengthened its cash position this quarter, however the stock yet declined. Put it in relation to the prior concerns relating to its liquid assets and cash burning rate and I would suggest that the market have punished the Nokia stock.

    Disclosure: I am long NOK.

    Stocks: NOK
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