Tech
Nokia: Despite Apple Settlement, Stock Drops To 13-Year Low
For Nokia, every piece of news is an excuse to sell the stock.
Yesterday, the beleaguered handset maker disclosed that Apple has agreed to pay the company both a one-time lump sum and ongoing royalties as part of a deal to settle all patent infringement litigation between the two companies. The stock actually rallied a bit yesterday on the news. But today the stock returned to its downtrend. Drop another couple of pennies, and Nokia shares will be below the $6 level for the first time since 1998.
Bernstein Research analyst Pierre Ferragu writes this morning that for Nokia, the Apple deal is “manna from heaven, and not in small amounts.” He estimates Apple could pay Nokia 500 million Euros – about $715 million – in a lump sum, with quarterly payments scaling up from 27 million Euros in Q3 2011 to 44 million in Q4 2012. Based on the settlement, he ups his 2011 EPS forecast for Nokia by 2 Euro cents to 22 cents, and for 2012 by 3 Euro cents to 22 cents. His new price target on the shares is $4.74, up from $3.
On the other hand, Ferragu remains bearish on the stock.
“In a fast changing market, Nokia is losing ground very rapidly,” he writes. “The company’s profit warning for the second quarter provided evidence that the next couple of years will prove very challenging, with the gross margin and market share trends of the last 4 quarters accelerating. Moreover, the collaboration with Microsoft now appears to us unlikely to be successful, as Nokia’s brand is losing ground too fast and the window of opportunity for an alternative ecosystem to succeed is vanishing rapidly. Even modeling a scenario in which Nokia stabilizes next year leads us to believe that the stock will under perform over the next twelve months.”
NOK today is down 24 cents, or 3.8%, to $6.02.
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Nokia’s mercurial fall would happen to Rim also soon. Both companies are so similar in failing with their own platforms and unable to go anywhere adopting foreign platforms. Both have huge sales networks which would suffer huge setbacks as they go down in sales.