Nokia Corp (ADR) (NOK)

NOK below 28??? That's nutz!

Marketgrader valuation puts it's PE at upper 20's.

It is now below 10.3!

People DRASTICALLY oversold Nokia on its last earnings, even though they beat estimates. Even if outlook for the future isn't as great as previously, it does not deserve to be at a PE of 10!

Nokia is by far the world leader in mobile phone sales.They also are one of the first to actively seek business in AFRICA, which is the last of the "emerging" markets to even begin to take off. Regionally, we have seen latin america, south america, east asia, and all these other regions take off. Africa has barely budged.
Looking long term, you have to look into the future. Africa is the next big Emerging Market.

Also the fact that they are not strong in America right now is a HUGE POSITIVE. The fact that most americans dislike their cellphones , along with the fact that Nokia holds practically no market share in America, leads to huge growth potential. They need more and better marketing here!! (Hence, the brilliant purchase of ENPOCKET!)
The downfall of Motorola and Sony will help this out, as people's perception of both are falling like a rock.

Also the acquisition of NAVTEQ and ENPOCKET shows the encouraging strategy that Nokia will take on in America in the next few years. Both technologically and through marketing.

Their new nano-cell technology that they are working on is very promising. New technology is what american's and other developed countries are craving. If nokia makes a major breakthrough here, the gains are endless.

Also, a world recession will help nokia more than any other phone company. With their dominance in the low-cost market, nobody can compete. They also are very solid and have huge cash reserves, leaving the short term fluctuations of the world economy to do little to no damage to the company.

This all matched with their stellar dividend and DRIP lead to a positive valuation, and the next earnings cycle will prove my point I believe.

I have never seen ignorance the way that i see it in fellow american people. This company has more sales than iphones and smartphones put together, the only thing is, most of its sales are overseas in china and such, so americans aren't even aware or the progress they are making. It is also working with intel to create like a superphone which combines computers with cell phones and well, i can't wait, this stock is going to blow once people catch on.

Nokia is the biggest maker of mobile devices in the world, with nearly 40% global market share of the handset market, which dwarfs that of competitors Motorola (MOT), Samsung, and LG. The company is exceptionally strong internationally, with a #1 market share in nearly all markets it serves, and sells over 90% of units outside of the North American market. The Nokia Siemens Network Group contributes nearly 35% of revenues by supplying equipment and infrastructure to network providers to implement cellular standards such as GSM, and data standards such as EDGE and 3G protocols. The recent acquisition of GPS mapmaker NAVTEQ added about 2% of recent sales at operating margins exceeding 20%.

Nokia's growth will primarily come from new cell phone purchasers in emerging economies like China and India. The company's exceptional scale allows it to produce a commodity product (low-end cell phones) at much cheaper prices than it's competitors - a key advantage. Nokia's scale advantage here is so dominant that it allows the company to earn over 15% profit even on these entry-level units, while it's most profitable competitor, Samsung, earns slightly above 13%. As prices continue to drop, only the firms able to produce at low enough prices will remain viable, and Nokia is clearly in the driver's seat here.

The company is also trying to grow it's service offerings, expanding into music and games, and adding a big bet on location based services with the acquisition of NAVTEQ. In addition to earning incremental revenue from these services, it's also a good way to build brand loyalty (or, more to the point, customer lock-in), as users become accustomed to Nokia's services and opt to replace their existing phone with another Nokia model instead of jumping to a competitor.

Financially, Nokia is rock solid. The balance sheet has about EUR 5.5 billion against about EUR 4.4 billion in debt, about 70% of which are in short term notes (long-term debt is just EUR 860). Return on capital is very impressive. Since 2004, MFI ROIC is over 160%, amazing for a company of this size, and standard return on capital is equally impressive at 75%. Margins have been solid as well. Operating margin 5-year average is 13%, free cash flow margin 9%. Nokia also pays a solid dividend yield of close to 4% at current prices. The dividend was cut about 20% in January, but payout ratio with the new rate is in pretty safe territory.

Those margins and return on capital figures are a testament to Nokia's competitive moat. Most of this we covered earlier, as Nokia's economies of scale and dominant market share allow it to be the low cost producer in a commodity market. However, there is some question as to the durability of this moat. The cost advantage applies to purchasers of low-cost models, mainly in emerging markets, but it does not apply to the cell phone market that is emerging in the more developed economies of North America and Europe. Which brings us to the biggest risk...

Nokia is clearly facing some serious and effective competition in the high-end "smartphone" category, the fastest growing sub-sector of the market. While Nokia is still the world's biggest smartphone maker, competitors Apple (AAPL) with the iPhone and Research in Motion (RIMM) with the Blackberry have quickly gained market share and are now threatening Nokia in foreign markets as well. Nokia's software solution was to fully acquire Symbian and open-source it, hopefully allowing a development community to fashion a smartphone operating system for them. This plan is risky, as Symbian is not inherently a smartphone OS like Apple's or RIM's. Smartphones are a very important niche to watch, as they clearly represent the future of mobile devices and provide significant lock-in potential for both consumers and developers. If Nokia falls behind here, it will be very difficult to catch up.

Nokia's current earnings yield is about 12.6% (about a 10 EV/E), quite cheap for such high margins, return on capital, and dividend yield. There are no serious competitors in the low-end market, and it's unlikely any new competitors will emerge here to challenge Nokia's dominance. Moreover, there should always be a market for people who want "just a phone!". Also, the network equipment group is in good position to benefit from constant upgrades to boost data transfer speeds (EDGE to 3G to 4G and beyond). This makes Nokia look like a good buy at current prices. However, it would certainly not be a Top Buy consideration due to a poor longer term outlook that will likely put a low ceiling on the earnings multiple.

Nokia is still the world leader in mobile phones, with the leverage and scale to cut prices when necessary to protect their market share. They have started to take a dominant position in emerging markets like India and China, despite intense local competition. They also have a highly profitable infrastructure division. The management team is solid and shareholder-friendly. Overall, I expect them to continue to provide great gains for several years.

Nokia Corporation manufactures mobile devices, and provides Internet services and digital map information worldwide.
Now that you know what they do let me tell you why they are great at what they do. Nokia is currently the largest personal communication equipment provider in the world. One of the key reasons for this is their production of ultra-low cost mobile devices for low income areas of the world. They are able to produce very cheap cell phones for emerging markets such as India and Africa.
These emerging markets are gold mines for Nokia, because although their leading competitor Motorola (MOT) is able to match Nokia's production in the US, they are unable to produce the low cost cell phones for third world countries. This untapped market is going to continue to grow and be the foundation for Nokia's continued growth and dominance in the global telecommunication equipment sector.
Now that the general idea is laid out let met hit you with some numbers. Nokia currently has about $2.4 billion dollars in cash...straight cash. This allows them to keep options open about acquiring new products and companies in order to maintain their goal of being on the cutting edge of cell phone technology.
At the end of last year, Nokia also pulled in a combined $24.5 billion gross profit, with a revenue of $71.48 billion. This is slightly lower than the previous year simply due to the contracting global economy. However, it continues to outperform the S&P 500 in the long run. Since 1995, Nokia shares are up 500% while the S&P is only up 50%. The recent peak for Nokia before this global recession hit had Nokia up 1500% vs. the S&P 300%. Beyond its growth, Nokia also has a dividend yield of 3.30% giving out $0.52 per share annually.

Nokia is almost practically synonomously related to cell phone service plans; and is often the producer of the first "offered" or suggested phone when introducing plans.

Nokia is the best of all the the handset manufacturers, but the threat from the computer intdustry, anticipated for years, is finally here. Now, Microsoft is real for mobile software, and TI, Intel, and Qualcomm are all starting to compete head-on. The combination will lower the barrier to entry for this industry.

Solid competitive advantage (economies of scale), 20%+ returns on capital and shareholder-friendly mgmt priced below fair value. NOK can increase cash flows 11-12% based on industry growth and share buybacks; investors see only 7-8% growth.

I think that in the short term Nokia is definitely a buy. Holding about a 34% market share of the approx. 750M handset being made is very impressive. Plus their large cash holding and low debt is what makes this a buy for me.

If they continue to read the market wrong then they will continue to have problems growing market share in the long run.

Layoffs and closures seem to be the norm for Nokia lately. The strike in their own country highlights this problem.

No more CDMA for Nokia either spells problems for them or problems for Qualcomm, we will have to wait and see how that plays out over the next couple of years

In today's market I am looking to purchase businesses with entrenched compeitive positions, fortress like balance sheets, that are cheap (when their revenues and margins are normalized) on a relative and absolute basis. I prefer they generate excess cash and are priced for zero earnings/cashflow growth.

NOK is one of those companies. It is the low cost producer. It also spends significantly more on R&D than its competitors. The result has been a fantastically strong market position worldwide. This is a high quality business yet it doesn't trade like one.

At current prices, we have the chance to pay roughly 8x FCF (adjusted for cash) for a business with ROIC in the low 30's, and close to a 4% dividend yield. Over the next 2-3 years, I expect earnings growth and multiple expansion to drive above average returns as today's price is just to cheap for a competitively advantaged, high return business with ample reinvestment opportunity.

Nokia is a strong company with good long term trends in its favor. Wireless is only going to be more important. In the last year Nokia has bought back around 10% of its share count, plus yields around 2.4% on today's ($19.40) price.

Proven consumer product - time and again, effective response to market demand, solid financials, capable management

"I say you should get greedy when others are fearful and fearful when others are greedy, but that's hard for most people to do."- Warren Buffett
Not hard for China
Not hard for India
Not hard for me

Expecting Nokia to continue its growth in emerging markets.

Bought today at $17.40 for my real money portfolio.

Excellent quality products, strong emerging market brand, way oversold, decent dividend....

I see NOK hitting $25 by this time next year despite slowing growth and potentially losing a little market share.

I have a nokia n95 and it blows the iphone away. While the iphone may get all the hype here in the USA, nokia smartphones dominate the rest of the world. They make very high quality phones and are actually *ahead* of apple in most respects. Also, they have been releasing phones unlocked to the USA for a while now, and I have to say that after owning an unlocked phone I will never go back. The business model of carrier subsidized sets is going down.

GPS and unlocked phones are the future. I already do stuff with my phone that iphone lovers envy. not to mention that nokia is rapidly expanding in asia etc.

When in India, nearly everyone I knew had a Nokia. And, India is a country (actually most Asian countries for that matter) where Brand name means a lot. A lot of" keeping with the neighbor-next- door" syndrome will drive sales there and rest of Asia

Nokia continues to be the #1 mobile handset provider and comes back with a strong highend lineup during 2007. Their position in the emerging markets is even better. Add to this the buildup of scale in the networks infra side and positive outcome from QCOM patent disputes and you have a solid winner for 2007!

Two words: Global domination.