Nokia Corporation (ADR) (NYSE:NOK), the Finnish mobile phone manufacturer and once the darling of the mobile phone business, is now a struggling company. However, Nokia Corporation (ADR) (NYSE:NOK) has been back in the news lately with recent rumors of potential takeover by giant Microsoft Corporation (NASDAQ:MSFT).
The million dollar question for Nokia Corporation (ADR) (NYSE:NOK) investors is whether or not the 150 year old company that has reinvented itself number of times in past will do it again, this time in an extremely competitive smartphone world.
Nokia Corporation (ADR) (NYSE:NOK) lags behind
Only 10 years ago Nokia Corporation (ADR) (NYSE:NOK) was the world’s largest smartphone maker with about 50% market share, way ahead of Apple Inc. (NASDAQ:AAPL)’s iPhone and Google Inc (NASDAQ:GOOG)’s Android smartphone operating systems when they were introduced. Nokia Corporation (ADR) (NYSE:NOK) has lost about 90% of its market value since then and clearly lost the smartphone battle.
These days Nokia lags behind competitors such as Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG), and under the most optimistic estimates Nokia has 2.5% of the global smartphone market. According to Business Insider, Google Inc (NASDAQ:GOOG) holds about 52% of the market with the world’s most popular mobile operating system, Android. Apple Inc. (NASDAQ:AAPL) has been behind Google this year, but holds 39% of the global market. Both companies still offer compelling growth potential, particularly in the global arena.
When it rains it pours for Nokia. In the first quarter of 2013, Nokia missed its sales expectations by 10 million units. Furthermore, following Nokia’s announcement that it may take over Siemens, S&P downgraded Nokia’s debt rating to junk, citing that the net cash of the phone maker will decline. In other words, the writing is on the wall–the company needs a desperate restructuring and there are two reasonable options on the table. The first is spinning off its phone division. The second option is to become a target buyout company by a giant company, perhaps Microsoft Corporation (NASDAQ:MSFT). In essence, Microsoft Corporation (NASDAQ:MSFT) has the opportunity to buy a veteran company with strong reputation and solid IP relatively cheap.
Taking over Siemens AG (ADR) (NYSE:SI)
Nokia has been engaged in a 50-50 joint venture with Siemens AG (ADR) (NYSE:SI). Recently the company announced it is buying the remaining Siemens AG (ADR) (NYSE:SI) stake in NSN for $2.2 billion. After the deal is completed, Nokia Siemens Networks will become a wholly-owned subsidiary of Nokia.
One should note that the Nokia Siemens Networks is a mobile infrastructure joint venture, and for Nokia to spend this kind of money on an infrastructure venture makes it a firm statement to saying goodbye to the smartphone arena.