Nokia Corporation (ADR) (NYSE:NOK) has certainly been in the headlines this week, with the “small” transaction that resulted in the handset division of the company and patent licenses being scooped up by Microsoft Corporation (NASDAQ:MSFT), and the relocation of Nokia CEO Stephen Elop to be a senior vice president under the soon-to-be-retiring Microsoft chief Steve Ballmer. While the company has seen a surge in stock price this week due to that piece of news, Nokia is continuing to make headlines in the operations of its company and the production of its flagship Lumia handsets. Here is a brief recap of the more prominent news items regarding Nokia on this Friday.
Nokia Corporation (ADR) (NOK): Rumored ‘MegaPhone’ Sits for Photos
There has been talk for months about Nokia Corporation (ADR) (NYSE:NOK) creating a direct competior to the Samsung Galaxy Note megaPhone device (that which is in the 5- to 7-inch range in size). Well, Sean MacLeod of Wireless Ground has reported the existence of some supposedly leaked photos of a new Nokia device being known as the Lumia 1520.
The Nokia Corporation (ADR) (NYSE:NOK) megaPhone is suggested to be a 6-inch monster, which is larger than the Galaxy Note, and is expected to offer 4G LTE capability and 20-megapixel PureView camera around back while running Windows Phone 8 on a 1920×1080 HD resolution display. The device is rumored to come out later this month with a retail price of $299 with a contract.
Bonds … Nokia Bonds
It was announced this week from Finland that Nokia Corporation (ADR) (NYSE:NOK) is moving on with its takeover by Microsoft Corporation (NASDAQ:MSFT) when the company announced that it would be issuing three sets of convertible bonds, which Microsoft will buy and will only convert any of the bonds into shares of Nokia stock after the purchase is completed, which is slated to be finalized in the first quarter of 2014. The bonds are due to hit the Frankfurt market September 23. As the bonds will be issued in three equal batches, one will mature in five years, one in six years and one in seven years. The total number of Nokia shares affected in this deal is about 9 percent of the total outstanding shares.
This Lumia Flagship Gets Permanent Price Cut
Nokia Corporation (ADR) (NYSE:NOK) generated some buzz in the smartphone market when it unveiled its Lumia 1020 handset- the one with the whopping 41-megapixel PureView camera sensor. While there are not official numbers of sales, reports are the device has been selling briskly, for lack of another term.
Recently, AT&T Inc. (NYSE:T) reduced the price of the Lumia 1020 to $199 with a contract, which was expected to be a temporary price cut to generate interest and sales. This week, AT&T announced that the $199 price tag will now be made permanent for the device, which is reportedly one of the top-three sellers for the nation’s No. 2 wireless carrier. As a special promotion, those who buy the device on the Microsoft online store would get a $74 camera grip for free.
If you are a prominent Nokia Corporation (ADR) (NYSE:NOK) investor like fund manager Ken Griffin, or even a Microsoft Corporation (NASDAQ:MSFT) investor like fund manager Jeffrey Ubben, what are your thoughts about these news items? Are you thinking that the Microsoft deal will wind up being a bargain, or a very risky gamble?
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Actually Warren Buffett failed to beat the S&P 500 Index in 1958, returned only 40.9% and pocketed 8.7 percentage of it as “fees”. His investors didn’t mind that he underperformed the market in 1958 because he beat the market by a large margin in 1957. That year Buffett’s hedge fund returned 10.4% and Buffett took only 1.1 percentage points of that as “fees”. S&P 500 Index lost 10.8% in 1957, so Buffett’s investors actually thrilled to beat the market by 20.1 percentage points in 1957.
Between 1957 and 1966 Warren Buffett’s hedge fund returned 23.5% annually after deducting Warren Buffett’s 5.5 percentage point annual fees. S&P 500 Index generated an average annual compounded return of only 9.2% during the same 10-year period. An investor who invested $10,000 in Warren Buffett’s hedge fund at the beginning of 1957 saw his capital turn into $103,000 before fees and $64,100 after fees (this means Warren Buffett made more than $36,000 in fees from this investor).
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