Let’s be honest here to start; no one has thought about Nokia being a premier company in a long, long time. The last time Nokia was at a forefront was when they had commercials on television touting a phone that had walkie-talkie like capabilities. Fast forward to 2017 and all of a sudden its shares are up over 20% since November and people are actually writing about it.

So what gives?

Nokia is Starting Over

Nokia no longer is the massive phone company that you think of when you walk into a retail store or get online to upgrade you mobile device. Nokia actually sold most of their phone company at one point to Microsoft with only a non-compete clause (ended 2016) that allowed them to go back into the smartphone industry recently. So because of this Nokia is going back to their roots and making phones again…right?

Not exactly. Nokia actually decided to license out their phones to HMD Global, a start-up led by Florian Seiche. Seiche, who was once a co-founder of HTC’s smartphone business, is back to shake up the smartphone industry along with a few exec’s that have Microsoft mobile sales backgrounds.

How good are these guys? Well the first HMD/Nokia smartphone that launched in January, the Nokia 6, sold out in just 23 seconds in China!  This sell out, according to HMD, was mostly made up of millennials. HMD also states that there will be three phones (Nokia 6, 5, and 3) launching in 120 countries this year, ranging in price from $150-250. All of these phones will use Google’s Android software and bundle of features that should allow it to take center stage in developing countries and with those that are tired of making payments for a $800 phone.

Add to this the more expensive Nokia 9, which includes a 22-megapixel camera, a microSD slot, 6GB of RAM, and the Snapdragon 835 processor, and HMD’s Nokia-branded phones look like they may be able to take a slice from the Samsung/Apple phone oligopoly. Either way the risk is limited for Nokia as they are not invested in HMD but are simply receiving royalties for each phone and tablet sold.

This is just the tip of the iceberg for Nokia though…

2016 Portfolio Additions

While all the news lately has been about the Nokia getting back into the phone game it seems that most people are missing out on what is really going on behind the scenes; Nokia has been acquiring a portfolio of companies.

In 2016 Nokia made six major acquisitions/mergers:

1.      Alcatel-Lucent

2.      Nakina Systems

3.      Withings S.A.

4.      Gainspeed

5.      ETA Devices

6.      Bell Labs

Alcatel Lucent

By merging with Alcatel Lucent it allows Nokia to not only reduce operating costs and interest expense but also allows them to expand their markets (up to 50%, according to Nokia). Alcatel has excelled in creating both routers and broadband networks, while Nokia has been creating and developing wireless networks. When you combine these two companies you end up with a portfolio of products that will allow Nokia to be a potential leader in the drive for 5G. Add to this the extensive US presence of Alcatel-Lucent and Nokia now has a share of a market where they had previously struggled.

Nakina Systems

Nakina systems is a Canada-based software company that Nokia says will help with their customers with security threats.  This acquisition may be crucial in Nokia’s development of cloud based products, Internet of Things products, as well as, what has been recently announced, “Monthly security updates” to their licensed smartphones.

The fact that Nokia now owns a security software company with experience and success the industry may end up saving them millions in the future. As the world with connections advances and grows, so will the security threats.

Withings S.A.

Withings is a company that specializes in digital health devices such as smart watches, thermometers, scales, blood pressure monitors, and much more. Nokia’s acquisition allowed them to re-design and re-launch Withings health tracking products along with a custom app built for Nokia, by Nokia.

All the while Nokia is also working on a Patient Care platform that will allow doctors to see real time data from patients suffering from chronic disease while they are at home. The potential here is huge, especially when you figure that Nokia may be able to have completely vertically integrated smart health-based wearables that could connect seamlessly to the infrastructure that they already offer to healthcare networks. This connectivity is inevitable in the healthcare industry and it looks like Nokia is trying to be at the forefront of the change.

Gainspeed

Gainspeed is based out of the United States and deals primarily in DAA (Distributed Access Architecture). What is DAA you may ask? In simple terms it is the next generation of cable connection. This allows Nokia to continue to push the boundaries of their fixed networks business and what types of services they will be able to build into them. In other words, Gainspeed is imperative in Nokia gaining share of the US cable industry, something they also advanced with the Alcatel-Lucent deal.

ETA Devices

Who is ETA Devices? Well according to Nokia they are, “…a US-based start-up specializing in power amplifier efficiency solutions for base stations, access points and devices.” In other words they are a company that is going to help Nokia in the march towards IoT and 5G. By being more efficient at base stations and access points this will allow Nokia to increase their margin on their 4.9G and 5G services.

Bell Labs

Finally let’s take a look at Bell Labs. Okay, okay, I understand that the Alcatel-Lucent merger also included Bell Labs so it may not be completely separate, but it really is a separate piece to the ongoing Nokia puzzle.

Bell Labs, a research facility based in New Jersey, is where the transistor, solar cells, and cell phones were born and the home to eight Nobel Prizes. Nokia plans to use Bell Labs for innovations based on networks. Already Bell Labs has announced huge speeds from fiber cables (potential 32Tb/s) with a trial they conducted with Facebook. Add to this a peak download rate achieved earlier this year on a wireless network of 10Gbit/s and you may soon be looking at the leader in the march towards 5G.

My Opinion

When you start to put together all of the pieces of Nokia’s acquisitions, patents, licensing, and R&D you begin to realize what this company is becoming…a potential IoT mammoth. This is all before adding the recent news of a probable addition of Comptel, which should help push Nokia’s software business further forward.

Now to be fair one of the main things that it seems Nokia will be able to excel at, 5G, may be another 3-5 years away in terms of a synchronization of software, hardware and networking. What if though, there was a company that could include all of these things under one roof? This may well be the goal of Nokia, a future one stop shop for all your 5G needs, phones included.

While there is still a lot for Nokia to figure out and competition around every corner, I like the re-focusing of the company and where they seem to be headed. With a plan to look to the future I believe that they are finally leaving behind their old reputation and starting anew with what got them their name in the first place: Innovation.

It will take time for this to play out but until then, I will sit, collect the dividend, and watch for Nokia to become one of the leaders in the march for world connectivity.

Disclosure: I am long NOK.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.