Nokia agreed to sell its mobile business for $5 billion to Microsoft and license all its patents to Microsoft for ten years for another $2.2 billion in cash.
Travis estimates on their analysis, that Nokia’s non-handset divisions, including cash, accounted for about 75% of its $18 billion fair value before the deal. “Before the deal was announced, Nokia was trading at a market capitalization of about $14.7 billion. The new Nokia will have NSN (Nokia Solutions and Networks), IP licensing and Here Maps as the three business heads after the handset division is sold”, Travis says.
If shareholders approve the Microsoft deal, Trevis expect the post-deal Nokia to be worth about $7.75 per share, Travis calculates.
Most of Nokia’s business value will come from its NSN. Travis estimates, that NSN will increase the near-term cash flow attributable to Nokia’s shareholders by about Euro 600-700 million and that towards the end of our forecast period (2020) by about Euro 500 million, adding about $1.70 per share.
Another valuable part of the Nokia is its strong patent portfolio.
Nokia has a very strong patent portfolio comprising close to 16,000 issued patents. The Company held close to 19% of the standard essential LTE patents and was the LTE leader by a big margin. LTE (=Long Term Evolution) is a standard for wireless communication of high-speed data for mobile phones and data terminals.
According to Trevis, patents would be worth at least $4 billion in value, or $1 per share. Trevis estimate that this is a floor on the value that Nokia’s shareholders should be attaching to its patent portfolio. On the future, patents may become even more valuable.
“Additionally, its important 4G LTE patents are likely to become even more valuable with time as carriers around the world transition to the new wireless standard and a greater number of handsets support 4G. This could actually bring further upside to our IP valuation”, Travis says.