Nokia (NOK) has really been an impressive performer of late, with the stock rising some 35% since mid-August and 90% year-to-date.
First, lets talk about this Navteq (NVT) deal. I believe Nokia got them on the cheap. I mean Navteq is the number one player in the online map space and I am surprised that neither Google, nor Garmin made a counter bid. $8 billion for a dominating player of navigational technology is dirt cheap and disappointing to me as an investor considering I own Navteq and was expecting to make a lot more over the next few years. Regardless, for those who bought this stock on my recommendation back on August 1st, the stock is up 27% in two months.
This deal will definitely hurt Garmin (GRMN), a stock that I first recommended early last year, then again in March when Garmin hit its 50 day average. If at any point, you bought Garmin on my recommendation, you have a gain of up to 190%. While it is hard to say how much the Navteq deal will hurt Garmin, I believe it is a good time to sell the stock and let Garmin breathe after its fantastic run this year.
Now, lets see what this deal does for Nokia. Keep in mind, that this purchase cost Nokia much less than $8 billion considering the weak dollar. In exchange, Nokia now makes money from Google, Garmin and cell phone and service providers who use this technology. More importantly, this adds to Nokia's neat list of acquisitions that will enable it to provide an advanced array of services on its wireless phones.
The wireless handset maker, while not as popular in the US, has a dominant market share in Asia and Europe. Second quarter operating margins came in at a healthy 21%. Many would be surprised to know that Nokia has over 50% of the global smartphone market, with its latest offering, the N95, looking like a Maybach in a world of Benz's, BMW's and Lexus. The N95 has a 5 mega-pixel camera, a far cry over the 2 mega-pixels offered in new phones just hitting the market, along with all the bells and whistles and a super-fast wireless network that makes internet browsing on this wireless beauty, a pleasure.
In their most recent quarter, Nokia grew revenues by 30% and earnings at a whopping 150%. $12 billion in cash and no long-term debt means that the company can buy back shares without having to borrow, and thats exactly what Nokia is doing. It plans to buy back $6 billion worth of shares over the next year. I believe Nokia needs to be bought here and any dips going forward.
-- Faisal Laljee
Full Disclosure: I own NVT and NOK but my positions can change anytime without notice.