Nokia should not only make Windows Phone devices such as the Lumia 925 (check out Nokia Lumia 925 here) but make Android-powered smartphones as well, an analyst reckons.
That analyst is Pierre Ferragu, an analyst from Bernstein Research. Barrons (check out blog here) reports the analyst saying, “From a recent market cap of €10.7bn, we believe investors should take between a positive €0.5bn and a negative €1.8bn of “real” net cash, into account, then €3bn for Nokia’s share in NSN and €2.2bn for Nokia’s IP portfolio. This leaves us with €5bn to €7.3bn for the handset business excluding IP revenues. This is 0.4x to 0.6x times sales for a business in great difficulties, with revenues on a 30% p.a. decline trend, a P&L in deep losses, exposed to a disappearing Feature Phone market and struggling to make a dent in an ultra competitive Smartphone market. It appears to us largely too expensive. As a comparison point, when Google acquired Motorola Mobility, a Sum-of-the-Part analysis shows the handset business without patents was valued a negative $850m (~ negative €650m). For Nokia, taking no net cash into account, our price target would imply a €400m value for handsets alone.”
Ferragu adds, “Our second conclusion is about how Nokia should consider it’s near term future. The company is facing two structural challenges: its exposure to the disappearing feature phone market and the lack of traction of Windows phones. Both could cost Nokia a lot of cash in the near term, in restructuring, marketing / distribution support, and operational losses, which means it could be too late to address the problem in a couple of years. From that perspective, a decision concerning a new platform strategy appears urgent. Better to take the pill before one cannot afford to do so anymore. We wouldn’t be surprised to see Nokia adopting Android as its new low-end platform by year end.”
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