Tomahawk, WI 9/04/2013 (BasicsMedia) – Once world’s top phone maker which still stands No. 2 only next to Samsung, does not list up even among the top five in the fastest-growing smartphone market. In a controversial decision couple of years back Nokia decided to use Microsoft Corporation’s (NASDAQ:MSFT) Windows Phone for smartphones, against the opportunities of Google Inc. (NASDAQ:GOOG)’s unparalleled Android operating system or NOK’s in-house software. Two years after struggling to penetrate smartphone market with MSFT’s Windows-based smartphones (under the Lumia brand name), NOK could just acquire over 3% market share, 90% of which is captured by Android and iOS.

Amidst the news of MSFT’s acquiring NOK’s devices and services division for $5 billion and an additional $2.2 billion to license NOK’s patents and mapping technology, this deemed to be right time to analyze NOK’s position after the sales of its phone business.Though the stock surged over 30% post acquisition announcement on Tuesday, Sep 3, there are mix calls from analyst and experts after consideration of its remaining business units mainly networking equipment unit, navigation business and technology patents. However, personally speaking, the remaining business units do not sound worth investingat this moment unless NOK reports some evidence of strategic look-out to conquer the market in these segments.

Networking Equipment Unit

Post the devices and services division sale,Nokia Solutions and Networks (NSN) – a global specialist in mobile broadband, remains the key asset for NOK. NSN has reported gross profit of $956 million for the 2Q13, around 22.6% up compared to 2Q12 despite 14.7% YoY decline in net sales. The net sales declined were across its major geographical markets including Asia, Middle East and Africa and Europe and Latin America.

Mobile broadband and Global Services stands for over 45% and 52% of its net sales and reported 354.5% and 156% year over year growth in operating profit from continuing operations during 2Q13. Part of profitability is contributed to reduction in production overheads and operating expenses which are expected to continue during second half of FY13.

TIM Brasilselected NSN to build its 4G Long Term Evolution (LTE) network alongside having contracts for roll-out, expansion or modernization of 3G / 4G mobile broadband services from AIS, Thailand; M1, Singapore; Ooredoo, Qatar and Claro Chile.

With its Technology Vision 2020 NSN is implementing hands-on innovation approach and continuing to expand the limits of 4G services with unparalleled speed records.

In a post-acquisition announcement, NSN CEO Rajeev Suri said that the unit is well positioned to deliver industry leading innovation to its customers and NOK’s renewed financial strength will aid the same.

Though in light of its current operations and financial strengths, NSN looks lucrative, after the sale of cellphone division the long-term cash-flow needs to be monitored alongside its strategies to counter the cut-throat competition following the invasion of ZTE, Ericsson  and Huawei in the wireless infrastructure and telecom equipment business. The NSN provides sound opportunities for turnaround and the result could be evident as early as during first half of FY14.

Navigation Business and Technology Patents

NOK will focus on its navigation service ecosystem with HERE and Advanced Technologies which will also bring some regular revenues to the company as a part of deal where MSFT will pay four-year license of the HERE services. However given the financial standings of the NOK this makes a much smaller segment of its overall business.

NOK’s broad portfolio of patents is the next valuable asset after NSN and as per deal MSFT will license this portfolio for 10 years.The company is considered to have some of most-in-demand high quality patents in the mobile market which could be leveraged at the expense of smartphone makers, as NOK hasn’t licensed many of its patents till date. After MSFT deal there is greater likelihood that the Finnish company would explore opportunities to license some of its technology patents.

To Conclude

Post MSFT deal NOK does have a value to offer but this is yet not the right time to invest into the speculative stock. It would be ideal to watch over the strategic direction the Finnish giant takes to establish itself in its ‘core’ businesses and quarterly posting of its results at least for the remaining half of the FY13.

DISCLAIMER: This content is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this report or email is not provided to any individual with a view toward their individual circumstances. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in our newsletter is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a real licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment.