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Investing in Nokia Stock

Written By Brian Hicks

Posted October 26, 2009

If it bleeds, it leads. . .

Be it the local 11 o’clock news or an international corporate brawl, tussles get top billing.

Today, the financial press is screaming about Finland’s Nokia filing a claim against Apple, Inc. in U.S. federal court, saying the iPhone represents a breach of ten Nokia patents.

But as an investor, you’re making a mistake if you just go for the corporate gore and ignore the revenue brewing in Nokia’s backyard. . .

Broadband Internet Becomes a Civil Right

You see, Finland just became the first country in the world to make high-speed internet a legal right for all its citizens. And it’s going to be a boon for Helsinki-based Nokia, which is already the world’s largest mobile phone maker and has plans to become a force in global broadband access.

As of July 2010, all of Finland’s 5.3 million residents will become part of a sweeping national plan to increase internet access and stimulate a high-tech economic recovery. Internet Service Providers (ISP) in Finland will be required to do everything possible to allow Finns access to a steady stream of data. They’ll flesh out delivery infrastructure like fiber-optic cable and beef up security mechanisms to ensure that new connections are safe.

The new national broadband mandate won’t just stimulate PC makers that profit as previously unserved Finnish consumers step into the PC market — Finland’s Ministry of Transport and Communications is allowing for the service requirement to be fulfilled through mobile devices like Nokia’s soon-to-debut N900 smartphone.

Some of the patents that Nokia is taking before a judge in the Apple case relate directly to Nokia’s new high-speed internet push and the Linux-based N900. Specifically, Nokia says Apple co-opted parts of its technology for both traditional telephony and wireless internet access.

Nokia Moves from 3G to 3D

Nokia plans to release a small computer called the Booklet 3G, named for the fast-spreading wireless broadband network now accessible in many countries.

The drive to supersede other smartphone and even PC makers will extend from Finland all the way around the world. . . and it will take things from 3G to 3D, as PC World magazine recently reported.

If you’re lost in new surroundings, or just trying to orient yourself (as I was plenty of times during a recent trip to San Francisco), a smartphone like the iPhone or the Research in Motion (NASDAQ: RIMM) Blackberry can turn you into a flashing blip on your handheld screen, complete with street names and compass directions.

But finding yourself inside isn’t nearly as easy. . . and we’re not talking about introspection or soul searching here.
We’re talking about knowing in which part of the shopping mall, doctor’s building, or even construction site you are.

And that’s what Nokia is aiming to achieve, as it builds on the 2007 acquisition of Navteq, a navigation software developer that competed on its own with GPS giants like Garmin (NASDAQ: GRMN).

PC World
recently noted that with Navteq now the core of Nokia’s Location-Based Services (LBS) division, the parent company can move forward with next-generation 3D mapping initiatives. Essentially, Nokia’s status as the world’s largest handset maker means that each phone can become a freelance surveying device that helps piece together pictures of inside spaces for the Navteq/Nokia database.

As of Nokia’s acquisition, Navteq already had the largest mapping database on the planet — and the Finnish company may soon hold the most comprehensive interior coordinate system around.

Now to the Numbers. . .

Big ideas aside, Nokia is a creature of the global consumer goods market. Telecommunication plays a major role in our social and financial lives — one that won’t go away, unless some sort of Armageddon knocks out the world’s telecom nerve centers.

But companies like Nokia can’t assume their market leadership will last ’til kingdom come. . .

And it’s certainly not good news that Nokia just reported its first quarterly loss ever. Since 1996, the company has been growing and growing, but the iPhone suit against Apple strikes many as a sour-grapes effort to climb back into a smartphone scene to which Nokia paid too little attention.

Apple and Nokia are now part of a flame war that will probably end out of court, but not before millions in legal fees are generated and Nokia potentially diverts important resources from the task at hand: getting back to profitability.

I watched Advanced Micro Devices (NYSE: AMD) doggedly pursue Intel (NASDAQ: INTC) in a similar way from late 2005 on, and AMD shareholders have nothing to show now but a share price that is down 64% over the past five years. Intel shares dipped into the red by 4% in the same time period, but we know who still holds the upper hand.

Nokia may be best off showing that Finland’s tech economy (near Sweden, Denmark and Estonia, which gave us the highly successful internet phone software Skype and file-sharing service Kazaa), can be a template for a major worldwide expansion of broadband access. Nokia can take the helm of a global high-speed wireless web campaign through its existing consumer base — and the fact that its country is now a policy Petri dish for 21st century telecoms.

Nokia dropped by 16% in the month to October 22, while Apple gained nearly 10% — largely on the back of iPhone sales.

Frankly, Finland could be first in a long line of countries that will make broadband internet a civil right. Each nation that recognizes the importance of high-speed internet to economic growth will generate new momentum for profit growth at smartphone makers.

Whether on the desktop or laptop or in the pocket, you want to tap international broadband expansion in your own portfolio.


Sam Hopkins
Sam Hopkins

P.S. Smartphone patent disputes are one thing, but smart grid electricity development is leaving plenty of room for multiple companies to profit. . . from metering solutions to massive load monitoring systems that can shift a whole city’s power balance and avoid blackouts. In rich and poor countries alike, progress means investment in new energy technology, and we’re tracking a world’s worth of spending in Green Chip International. To learn more, click here.