Nokia Reportedly Considering a Merger or Asset Sale

Nokia faces stiff competition in its industry. It may consider a deal with competitor Ericsson, according to a report.
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Nokia (NOK) - Get Report shares rose after a report said the telecommunications network equipment and services provider was considering a merger or asset sale.

Heated competition in the telecom space has made Finland-based Nokia’s life difficult, and that is pushing the company to consider those options, knowledgeable sources told Bloomberg. The company is working with advisers on the possibilities, the sources said.

Nokia lowered its earnings forecast and halted its dividend in October. It doesn’t expect a big rebound in profits until next year. The stock has dropped 33% over the past 12 months.

Nokia may consider a partnership or merger with its Swedish competitor Ericsson  (ERIC) - Get Report, according to Bloomberg. But a hook-up with Ericsson might trigger an antitrust investigation and concern about job losses, the news service said.

If it decides on selling itself, Nokia also might contemplate a deal with technology companies or wireless carriers, because there aren’t a lot of competitors in its own sector, Bloomberg said. Ericsson and China’s Huawei Technologies represent its main competitors amid the race for the 5G network.

Morningstar analyst Mark Cash believes that Nokia shares are undervalued.

“No-moat Nokia's 1% year-over-year sales growth in the fourth quarter showcased strong demand for various network products, while the software and technologies businesses shrank compared with the prior year,” he wrote in a report earlier this month.

“Nokia's routing and optical networks segments continue to expand rapidly, while mobile access grew slightly as Nokia mitigates strong versus lethargic demand for radio networks based on geographies.”

Cash sees fair value for the stock at $5.10

At last check, Nokia shares traded at $4.20, up 7.42%.