Beleaguered handset manufacturer
) has agreed to sell more than 500 wireless patents to New
York-based Vringo Inc. for a cash consideration of $22 million. We
believe this is a strategic move by the company to offload some of
its non-core assets to support the corporate restructuring it had
announced in June.
As part of the deal, Nokia is selling 31 of its standard range
of cellular infrastructure technology and will end up earning
royalty revenue, if Vringo manages to generate more than $22
million from the patents. On the part of Vringo, it will issue 9.6
million shares to raise the money for the patent acquisitions.
In another move, the Finnish company is also selling its
remaining Qt software business to Digia, which acquired a portion
of its business about a year ago. Nokia is moving away from this
open source application developer as it was largely used in the
Symbian operating system, which it has already ditched for
Despite teaming up with
) to develop Windows-based smartphones, Nokia is still lagging far
) iPhone, and an array of other smartphone manufacturers using
) Android platform.
In an effort to overcome this difficult situation, the company
is trimming its work force by 10,000, downsizing its research and
development units and selling its luxury phone unit Vertu that
would thereby help it to reduce $2 billon in cost by the end of
We believe selling patents is the right strategy for Nokia, as
it will help the company to monetize its huge portfolio of patents
coupled with minimizing its legal risks. Nokia will focus on many
such deals until the company's newly launched Lumia series of
smartphones is able to generate significant sales and establish a
significant share in the smartphone market.
The current Zacks Consensus Estimate for Nokia Corporation is
pegged at a loss of 11 cents for the third quarter with a growth
rate estimate of (382.35%). For 2012, the Zacks Consensus Estimates
stands at a loss of 37 cents with a growth rate of (197.97%) but
for 2013 the Zacks Consensus Estimates stands at breakeven with a
growth rate of 100.00%.
We retain our long-term Neutral recommendation on Nokia.
Currently, Nokia has a Zacks #3 Rank, implying a short-term Hold
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