Nokia’s current status, with a latest 18 percent drop in stock price, is gathering the interest of buyers who believe that the company still has potential left to fight its way back into the smartphone market.
Even as Nokia, supported by Microsoft, tries to build its position in the smartphone market, they have cut down on over 10,000 jobs including several high profile positions and have had their credit their ratings reduced to junk. Doug Dawson, Nokia’s spokesman, refused to comment on the possibility of a takeover; but Nokia’s $12.4 billion in cash and short term investments and over 10,000 patent families may attract Microsoft and other firms as potential bidders due to its rapidly declining stock price.
Nokia, a company which was once the leading handset maker for 14 years, is now being replaced by Apple and Samsung. Ever since the iPhone was introduced, Nokia’s market capitalization has suffered a drop by 90 percent. In an attempt to save their sliding position, Nokia adopted Microsoft’s Windows Phone software in 2011. However, their smartphone shipments have fallen by 7.8 percent already in the first quarter of 2012. Currently, the company is valued at 81 percent discount to its revenue, with a market capitalization of $5 billion. Analysts believe that Nokia will easily find a private equity firm that would be willing to purchase its handset business, owing to the cash reserves they possess. Similarly, their failed venture with Siemens network could be sold off to a public company.
With false rumors of Samsung offering to takeover Nokia, the latter’s shares saw a rise for the first time in five months. Microsoft is most likely to buy Nokia, as they prepare to compete with Apple and Google’s Android with their Windows Phone platform. In that case, Nokia’s failure to rise up this year may end up costing Microsoft dearly. On a brighter note, following this rumored purchase, Nokia’s patent portfolio, almost worth $7.5 billion, could largely benefit Microsoft. Other potential buyers interested in Nokia include Huawei Technologies and ZTE, both of which are Chinese telecommunication companies. However, spokespersons for both the companies did not leave a positive comment on the matter.
Analysts point out that Nokia’s currently dwindling status is the reason why buyers aren’t keen on making a move, calling for the company to quickly stabilize their business. Nokia still has hope left as Windows Phone is expected to catch up to Android and surpass Apple’s iOS by 2016 in a report prepared by the well known research firm Gartner.