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Chris Lau, Kapitall: Will Nokia's patent settlement with HTC mean good things for mobile communications stocks?
Nokia (NOK) reported weak results in its core networking business, the company announced a patent settlement and collaboration deal with HTC. This boosted Nokia shares by 9.27% on the day. With the patent portfolio largely discounted by investors, what is this deal worth, and what will future ones bring to the company?
Nokia settles with HTC
Nokia said on February 7 that HTC will settle all patent litigations between the two companies. More importantly, the companies will
collaborate on the patents each company owns. The dollar value was not disclosed, which suggests that investors who bought its shares after the dip in January will take profits.
[Read more from Kapitall: 4 Water Companies That Can Win Big with Federal Spending]
It is anyone’s guess what the patent deal is actually worth, but the markets raised the market capitalization of Nokia by $400M.
Investing IdeasQualcomm (QCOM) is the largest digital communications company by market capitalization and trades at a forward P/E below that of Nokia (15 compared to 22).
Juniper Networks (JNPR) and
Motorola Solutions (MSI) have better revenue growth characteristics than Nokia in the networking space.
Investors with a longer time horizon may look forward to patent settlements with
Google (GOOG) and Android. Traders who speculated on the IP settlement will leave their trade in the next few trading sessions, allowing long-horizon investors to allocate capital based on fundamentals. Nokia’s rally may lose steam due to profit taking, but future IP deals should give support for its shares. The start of a dividend plan by Nokia may give an additional boost.
Click on the interactive chart to view data over time.
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