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A day after bouncing on a mixed Q2 report, Nokia (NOK -6.5%) is slumping towards pre-earnings...

A day after bouncing on a mixed Q2 report, Nokia (NOK -6.5%) is slumping towards pre-earnings levels. Fitch is downgrading Nokia's credit rating yet again (previous), and many analysts are cutting their PTs. "Nokia's story remains theoretical pending consumer adoption of [Windows Phone 8]," Barclays asserts. Yesterday, the WSJ took a look at the poor judgment and slow-footed culture that helped cost Nokia its smartphone lead, in spite of huge R&D investments. (more)
Comments (25)
  • dhdhoora
    , contributor
    Comments (435) | Send Message
     
    Please review the WSJ "took a look" link. There, you find an article detailing the decade-long dysfunction within NOK. However, I also suggest you look at the video of Mr. Elop making a pitch about Nokia's strength and future. IMHO, if you look to the past, you run from NOK. If you look to their honest acknowledgement of failure, the resources the company still has, and its vision for the future -- you have to like what you see. (The big difference between NOK and RIMM is that RIMM did not fess up to their problems...). NOK share price is now well below assets and its also pretty apparent that NSN will probably be spun off. So, I like the NOK leadership and think they have a decent chance to make it...

     

    All the very best,
    Don
    20 Jul 2012, 10:39 AM Reply Like
  • RealMrBean
    , contributor
    Comments (67) | Send Message
     
    I think you hit the nail on its head, and this is a good summary.

     

    An NSN spin-off will, however, prove difficult in these days. Whilst it is good to see that NSN has become profitable again in the last calendar quarter, attempts to sell the unit over the past two years have not been terribly successful - for the obvious reason that NSN has been losing money and is no longer operating in a growth market (despite all the new technologies such as LTE that come on stream).

     

    IMO, Nokia are in for a much better chance of survival than RIMM. To start with, their management is simply not as inept as "denial Heins" (in his roles as SVP Products, COO and CEO) and consorts in Waterloo. The single one data point that inspires more trust in NOK than RIMM is the time-to-revenue, or - in other words - time it has taken to launch a new phone with a totally new OS:

     

    * RIMM: from April 2010 to Q1/2013 = almost 3 years
    * NOK: from February 2011 to October 2011 = 9 months

     

    ...these guys know how to build quality products quickly and get them into markets, though they may have "overlooked" some of their own inventions.
    22 Jul 2012, 09:18 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (8661) | Send Message
     
    What will happen to Nokia if the rosy hope that Windows 8 will be a rousing success turns out to be false?

     

    Do they have a plan independent of Microsoft?
    20 Jul 2012, 11:10 AM Reply Like
  • SA Editor Eric Jhonsa
    , contributor
    Comments (853) | Send Message
     
    Nokia has talked about having a backup plan. Odds are it involves Android ... and quite possibly firing Elop along the way.
    20 Jul 2012, 11:43 AM Reply Like
  • dhdhoora
    , contributor
    Comments (435) | Send Message
     
    Eric:

     

    Mr. Elop can be held accountable for the "all in" decision to go with MSFT. If that fails, he probably will be fired. (Alas, too may people also want to blame Mr. Elop on NOK miss-steps that took place before his tenure...) My guess is that with a MSFT bust, the company would then be broken up with IP assets sold, NSN spun off, and yes, what is left used to punch out low-end, low-margin phones. In any case, the company stays out of BK but today's share price already suggests that the worst is going to happen. No way...

     

    All the very best,
    Don
    20 Jul 2012, 11:55 AM Reply Like
  • SA Editor Eric Jhonsa
    , contributor
    Comments (853) | Send Message
     
    That seems possible. I'm hoping Nokia succeeds (the more smartphone competition, the better) and think PureView could help them stand out given the consumer obsession with mobile photo-sharing. But they don't have a lot of time, and badly need to roll out cheaper WP models to compete with Android on the low-end.
    20 Jul 2012, 12:08 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (8661) | Send Message
     
    Down over 8% AGAIN today AFTER the huge earnings beat yesterday.

     

    Nokia needs the new CEO (perhaps Leo Apotheker or Carol Bartz?) to announce the transition to Android TODAY to stop the Nokia coffin from being slowly placed in the grave at the "they were once big tech names" graveyard.
    20 Jul 2012, 01:08 PM Reply Like
  • Charles Santerre
    , contributor
    Comments (1242) | Send Message
     
    If you read DVL's posts: he is clearly shorting Nokia as he has nothing good to say about them. Further he will twist any good news into bad. He claims that if the price went down far enough he would buy, but continues to lower his price, and in any case, who cares? He also claims that his objective here is to warn others from being lured into investing in the black hole that has become Nokia, while ignoring his self-serving motives. He also believes that Nokia should take its hard earned and precious cash and buy back its own shares. Only an un-informed "investor", who thinks that an increased share price will help a company in any way, would advance such a crazy ideas. He has it upside down. Once a share is issued, it's out there, out of the companies hands, and no longer impacting positively or negatively a companies financials. For some reason, he cannot understand that, however so basic an idea.
    20 Jul 2012, 02:12 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (8661) | Send Message
     
    1. You have no idea what my position is in Nokia (or if I have any position at all). But I shouldn't be surprised as your logic is also supportive of the idea that throwing good money after bad is intelligent (it is, of course, the opposite of good investing).

     

    2. What kind of rocket scientist buys a stock that is CLEARLY in free fall instead of simply waiting for the stock to find support? That goes for ANY stock.

     

    Why risk total capital loss for the chance to be able to brag to your friends that you caught the "absolute bottom". If what you and the other Nokia pumpers say is true, one could buy Nokia on the way back up @ $7.00 and STILL have a great profit if they sold years later for $65.00.

     

    After yesterday's "good news" the stock tanked down 9% today before "recovering" to -7%. That is a VERY CLEAR SIGNAL TO WAIT IF YOU MUST BUY THIS PARTICULAR STOCK!

     

    3. Warren Buffett has forgotten more than both you and I will ever know about investing. Here is what he wrote this year about the idea of buybacks:

     

    :::Charlie [Warren Buffett's partner] and I favor repurchases when two conditions are met: first, a company has ample funds to take care of the operational and liquidity needs of its business; second, its stock is selling at a material discount to the company’s intrinsic business value, conservatively calculated.

     

    We have witnessed many bouts of repurchasing that failed our second test. Sometimes, of course, infractions—even serious ones—are innocent; many CEOs never stop believing their stock is cheap. In other instances, a less benign conclusion seems warranted. It doesn’t suffice to say that repurchases are being made to offset the dilution from stock issuances or simply because a company has excess cash. Continuing shareholders are hurt unless shares are purchased below intrinsic value.:::

     

    He went on to use IBM ( a recent Berkshire purchase) as an example:

     

    :::If IBM’s stock price averages, say, $200 during the [next five years], the company will acquire 250 million shares for its $50 billion. There would consequently be 910 million shares outstanding, and we would own about 7% of the company. If the stock conversely sells for an average of $300 during the five-year period, IBM will acquire only 167 million shares. That would leave about 990 million shares outstanding after five years, of which we would own 6.5%.

     

    If IBM were to earn, say, $20 billion in the fifth year, our share of those earnings would be a full $100 million greater under the disappointing scenario of a lower stock price than they would have been at the higher price. At some later point our shares would be worth perhaps $1-1/2 billion more than if the high-price repurchase scenario had taken place.

     

    The logic is simple: If you are going to be a net buyer of stocks in the future, either directly with your own money or indirectly (through your ownership of a company that is repurchasing shares), you are hurt when stocks rise. You benefit when stocks swoon.:::

     

    Now why not write to Warren Buffett in Omaha and tell him what an idiot he is and that you will teach him something about investing and capital allocation?
    20 Jul 2012, 08:19 PM Reply Like
  • Leont68
    , contributor
    Comments (1365) | Send Message
     
    All I know is that it doesnt take much good news for Nokia to pop. I cannot wait till the day comes when nokia shares keep jumping up and up and up. And ill be laughing at all the people scrambling to cover their short positions :) Will it happen? Who knows.

     

    On the other hand I might lose whatever I invested in Nokia if it goes bankrupt. I will have no regrets if it does...
    21 Jul 2012, 07:06 AM Reply Like
  • FXTrading101
    , contributor
    Comments (41) | Send Message
     
    I wouldn't look at the percentage of gyration and let it cloud my judgement. Volatility is the hallmark of bottoming and topping formation. At both of these extremes, investor's emotions are running high. While at the top, investors are afraid that they'll miss another run. Likewise, at the bottom, they'll think it will go lower. Neither of which likely occur, and people end up chasing volatility all day long. Please note that I'm not calling a bottom of NOK at this level, I'm merely pointing the characteristics of a top and bottom typically found in stock prices.
    22 Jul 2012, 10:44 AM Reply Like
  • Charles Santerre
    , contributor
    Comments (1242) | Send Message
     
    DVL: "Charlie [Warren Buffett's partner] and I favor repurchases when two conditions are met: first, a company has ample funds to take care of the operational and liquidity needs of its business; second, its stock is selling at a material discount to the company’s intrinsic business value, conservatively calculated."

     

    In this case, the first condition is not met. Go back to school.

     

    No Warren Buffet & Co are not idiots, but name dropping and even insinuating that you have the knowledge to invest as they do, does not elevate you in any way. As you like to say: saying does not make it so. :-)

     

    Why don`t you write Buffet and ask him if NOK should be buying their own shares?
    23 Jul 2012, 02:09 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (8661) | Send Message
     
    1. The fact that you mentioned I write Buffett about a tech hardware company tells me you know nothing about what Warren likes to invest in and what he avoids.

     

    2. I try to learn from the best (e.g. Warren Buffett) so it isn't about "name dropping" and no, I'm not insinuating anything. You've made a false inference.

     

    3. It is amazing that just a couple of months ago (when Nokia was trading in the mid $3s) all I read on SA was that Nokia had a virtual unlimited supply of funds from Microsoft. NOW the Nokiaists are implying that money is tight. Which is it?!?
    23 Jul 2012, 04:19 PM Reply Like
  • Charles Santerre
    , contributor
    Comments (1242) | Send Message
     
    1. you brought up writing to Buffet, I know he only invests in co.s he knows about. But I am sure he could still answer the question: it would take him about 60 secs to realize that the resounding answer would be NO! re share buybacks in this situation.
    2. you always try to mimick the principles of Benjamin Graham almost as if you attended his classes. You know I read Security Analysis & The Smart Investor. Big whoop. While it has good ideas, it was written before the era of rapid computer trading and social media, all of which make the stock price pendulum swing further in both directions. Also it was written when the word of S&P, Moody's & Co meant something. And I include most online media as social media because they ain't journalist by any stretch.
    3. I never said Nokia has lots of cash, however you must think so since you promote that they buyback their own shares to increase EPS. Well first off you need earnings to increase the number. See no. 1 and repeat.
    23 Jul 2012, 05:00 PM Reply Like
  • Leont68
    , contributor
    Comments (1365) | Send Message
     
    I dont know much about finance, but I live and breath technology since its part of my job and my hobby. I believe in the game plan Microsoft and Nokia have.

     

    Warren Buffet says that he doesnt invest in things he doesnt understand. Nokia is a company I can understand that is why I feel comfortable investing in it. While the majority of people think Nokia might not make it through the end of the year, one thing I do remember that Warren Buffet said was invest while everyone else is fearful.

     

    Before you start throwing all these financial terms and qoutes to me DVL, I am a financial rookie and I get headaches trying to understand them all :P
    23 Jul 2012, 05:12 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (8661) | Send Message
     
    Dear Likely Nokia Bagholder,

     

    I clipped a quote for you where Buffett SPECIFICALLY MENTIONED HIS IBM INVESTMENT AND ITS SHARE BUYBACK STRATEGY. So your first point makes zero sense.

     

    Next point...dismissing the classic texts (that serve as virtual BIBLES to value investing which have stood the test of time) because they were written before the age of HFTs also makes no sense because HFTs are a TRADING phenomenon not an INVESTING phenomenon.

     

    Lastly, you must be the only Nokia pumper here who claims Nokia has no cash to spend on profitable investments so at least there you are finally coherent.
    23 Jul 2012, 07:12 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (8661) | Send Message
     
    Just read his letters...

     

    They are much better than a MBA...and FREE!

     

    http://bit.ly/wgvsh9

     

    I guarantee after you study them and learn (for FREE btw) you will never again make an investment as silly as Nokia @ ~$3 or more!
    23 Jul 2012, 07:17 PM Reply Like
  • Leont68
    , contributor
    Comments (1365) | Send Message
     
    I will have a look at it, but I will keep investing in Nokia in the mean while. Its not like i am betting my house on it or something.
    24 Jul 2012, 07:09 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (8661) | Send Message
     
    Its a free country.

     

    Best of luck! :)
    24 Jul 2012, 02:18 PM Reply Like
  • Leont68
    , contributor
    Comments (1365) | Send Message
     
    "Its a free country.

     

    Best of luck! :) "

     

    now thats a comment i agree with. Thanks.
    24 Jul 2012, 02:57 PM Reply Like
  • dhdhoora
    , contributor
    Comments (435) | Send Message
     
    Deep...

     

    That's the $64B question. But I'm encouraged by MSFT's Surface and XBox programs. The MSFT PC world is still largely outside of any ecosystem and the key to the future is mobility. MSFT knows this. So, IMHO, MSFT W8 WP8 will be good enough to move a lot of biz apps to mobile platforms. NOK's Pureview and location stuff can be real differentiators. But the biggest reason to be hopeful is that NOK is no longer in denial. Elop appears to be doing the right things to rightsize the company after their fumbles. The are locked in on conserving cash and are now running the company accordingly. So, MSFT holds the keys and that is why NOK is a speculative investment. My guess is that they do succeed and accordingly is worth speculative investment $$.

     

    All the very best,
    Don
    20 Jul 2012, 11:31 AM Reply Like
  • 1mp1r3t4
    , contributor
    Comments (326) | Send Message
     
    Maybe some of us need to join Nokia Anonymous and go through that 12-Step Program. For now, acquiring the company's stock is speculative and only gamblers with enough money to overcome losses should engage in going long at these levels. Others, more cautious investors and with less resources to offset losses should consider staying away. In the end, no risk taken provides no rewards, but it saves assets from taking hits. Carpe Diem!
    20 Jul 2012, 11:56 AM Reply Like
  • westkite
    , contributor
    Comments (218) | Send Message
     
    Stay away, you wiiiiiiilll lose all your money.
    20 Jul 2012, 12:52 PM Reply Like
  • Leont68
    , contributor
    Comments (1365) | Send Message
     
    Ill be greedy now while everyone is fearful
    20 Jul 2012, 03:16 PM Reply Like
  • Leont68
    , contributor
    Comments (1365) | Send Message
     
    Well Nokia has gone up quite a lot the last couple of days. Hopefully it means that the worse it over. Probably not yet, but there is a glimmer of hope.
    26 Jul 2012, 09:28 AM Reply Like
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