Nokia Corporation

Consumer Coverage Group – Winter 2015

•Alessandro Grieco, Group leader

•Paul Harrison

•Albert Gianatan

•Michael Ramadan

•Aanchal Ramani

•Erin Ashley Cohen

•Monica Chan

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Company Profile• Finnish multinational communications and information technology company

• Focuses on large-scale telecommunications infrastructures (Networks), technology development and licensing (Technologies), and online mapping services (HERE)

• Previously was a significant contributor to the mobile telephone industry before selling that business to Microsoft in 2013

Fundamental Analysis

Investment Thesis (buy)With Nokia’s sale of its Devices & Services business (D&S) to Microsoft, it can begin to steer its way into a new era of profitability driven by focusing efforts on what it leads, namely network infrastructure, location intelligence and IP licensing

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Management Overview

 

•CEO (2009): Rajeev Suri

- Worked in roles comprising strategy and M&A, product marketing, sales, consulting

- National Account Manager – Transmission / Manager ILC India

•Chief Financial Officer (2012): Samih Elhage

- Senior Advisor, leading private equity and global management consulting firms.

- Multiple leadership and management roles related to Network Development at Bell

•President of HERE (2014): Sean Fernback

- Senior Vice President of Engineering & Product Development, TomTom, 2008-2014

- Founder and CEO, Motionworks, 1989 – 2000

•Executive Vice President: Timo Ihamuotila

- Previously CFO and interim President of Nokia Corporation

- With Nokia 1993-1996 rejoined 1999

A Nokia You’ve Never Seen

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Acquisitions

Microsoft Acquisition (September 2013)

• NOK’s D&S for EUR5.44 billion– EUR3.7 billion for D&S– EUR1.65 billion for 10yr mutual

patent licensing agreement

Nokia Siemens Network (June 2013)

• NOK NSN for EUR1.7 billion• Joint venture with Siemens

Communications • Pioneered development of LTE• Launched Industry’s first M2M

software suite for GSM

What does it mean for Nokia?• Leaning up by shifting over 20,000 employees over to Microsoft, reducing

revenues by 46% (2013) equaling over EUR 10.7 billion• Still maintains some of the factories, Nokia isn’t out of consumer electronics

completely• Cutting its losses renewed market confidence

Restrictions & Arrangements•MSFT received 10 yr license arrangement to use Nokia’s brand name i.e. Lumia •NOK restricted from licensing its own brand name for 30 months•NOK restricted from using its own brand name for its own mobile devices until Dec 31, 2015

– Except: the N1 tablet ($250 in China)

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Nokia renaissance

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Nokia’s Turnaround

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Value Proposition - Short Term

Nokia Networks

• Fastest growing sector in the three , YoY 35% growth in Operating Profit• Examples of LTE network infrastructure deployment:China Mobile Chunghwa Telecom in Taiwan; Celcom in Malaysia; Sprint in the United States; US Cellular’s

second wave of LTE services; with TIM Brasil and Oi Brasil; Movistar and Claro in Chile; MTS in the Moscow and Central Russia regions; SFR in Paris; Tele2 in the Netherland; Vodafone in New Zealand, and Ooredoo in Qatar….

• Cutting-edge LTE-A & 5G deployment in South Korea

HERE Technologies & Technology• Sold HERE Auto location services to over 19 million vehicles 2014• Cooperated with Mercedes to implement location services • Patent licences are “free money”

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Value Proposition – Long Term

Future is in interconnectivity

• Seamlessly integrating Long-term leadership targeted in three key areas

Nokia believes that over the next 10 years billions of connected devices will converge into intelligent and programmable systems that will have the potential to improve lives in a vast number of areas: time and availability, transportation and resource consumption, learning and work, health and wellness, and many more.

This new world of technology will require 1) connectivity capable of handling massive numbers of devices and exponential increases in data traffic; 2) location services that seamlessly bridge between the real and virtual worlds; and 3) innovation, including in sensing, radio and low power technologies. Nokia’s vision is to be a leader over the long term in these three areas.

Change in direction

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Comps Model

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Risk Factors

• Ability to launch products on a timely basis within the context of a rapidly evolving tech environment

• Intellectual property issues• Network infrastructure development in emerging markets + general

economic conditions• Networks currently dependent on small number of large multi-year

contracts– an issue with or loss of a single contract can carry large effects

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DCF Analysis

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• Bear: -10% Growth Rate

• Base: 20% Growth Rate

• Bull: 30% Growth Rate

Targets and Strategy

• Buy: at around $7.20

• Exit: if stock drops under $3.50

• Time horizon: 2-3 years

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Questions?

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