NEW YORK (TheStreet) -- Selling its handset business to Microsoft (MSFT) has freed Nokia (NOK) to move into other promising areas, an action that could be appealing to tech investors who wish to get adventurous with their stock portfolios.
Jefferies has already upgraded Nokia's rating to buy from hold and bumped up its target stock price to $10.31 a share from $2.99, citing potential returns for the Finnish company's patents portfolio. Nokia shares closed Friday at $7.75, down 4.4% for the year to date.
"There's a great deal of potential in Nokia's intellectual property rights business and intriguing prospects for Nokia to extend beyond patents, partly because it has divested its handsets business -- a move that has re-injected equity into its balance sheets," Lee Simpson, managing director and the head of European Technology Hardware Research at Jefferies, told TheStreet.
Simpson emphasized the $7.2 billion handset deal with Microsoft allows Nokia to work in other areas including developing its own tablets.
Nokia currently sees a market opportunity of $95 billion (EUR 70 billion) in the mobile broadband market, according to a confidential internal document on the company's business strategy for the year ahead. The document also reveals the Finnish telecom has set its sights on gaining mindshare as a mobile broadband specialist by 2016 through its key Networks business division, Nokia Solutions and Networks, or NSN.
NSN already accounts for nearly 90% of the company's group sales while its mapping business, HERE, and its Technologies division constitute close to 8% and 5%, respectively, of overall sales.
Nokia has started reaping dividends from its efforts to strengthen its capabilities across all its non-handsets businesses -- a strategy that first evolved amid its painstaking attempts at a two-year turnaround that officially came to fruition earlier this year.
In spite of a net sales decline of 15% to $3.68 billion (EUR 2.7 billion) in the first quarter of 2014 from the year before, the telecom giant posted a year-on-year increase of 20% in its operating profits. The growth in its operating profits positions the company for long-term success as it reflects a strong focus on its mobile broadband, patents portfolio and managed services businesses as core business operations.