How Will Nokia’s HTC Rally Affect These 3 Mobile Communications Stocks?

Will Nokia's patent settlement with HTC mean good things for mobile communications stocks?

Just after Nokia (NOK) reported weak results in its core networking business, the company announced a patent settlement and collaboration deal with HTC. This boosted Nokia shares by 9.27% on the day. With the patent portfolio largely discounted by investors, what is this deal worth, and what will future ones bring to the company?

Nokia settles with HTC

Nokia said on February 7 that HTC will settle all patent litigations between the two companies. More importantly, the companies will collaborate on the patents each company owns. The dollar value was not disclosed, which suggests that investors who bought its shares after the dip in January will take profits.

It is anyone’s guess what the patent deal is actually worth, but the markets raised the market capitalization of Nokia by $400M. 

Investing Ideas

Qualcomm (QCOM) is the largest digital communications company by market capitalization and trades at a forward P/E below that of Nokia (15 compared to 22). Juniper Networks (JNPR) and Motorola Solutions (MSI) have better revenue growth characteristics than Nokia in the networking space.

Bottom Line

Investors with a longer time horizon may look forward to patent settlements with Google (GOOG) and Android. Traders who speculated on the IP settlement will leave their trade in the next few trading sessions, allowing long-horizon investors to allocate capital based on fundamentals. Nokia’s rally may lose steam due to profit taking, but future IP deals should give support for its shares. The start of a dividend plan by Nokia may give an additional boost.

Click on the interactive chart to view data over time. 

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1. Nokia Corporation (NOK, Earnings, Analysts, Financials): Provides Internet and digital mapping and navigation services worldwide. Market cap at $27.38B, most recent closing price at $7.66.

 

2. QUALCOMM Incorporated (QCOM, Earnings, Analysts, Financials): Engages in the development, design, manufacture, and marketing of digital wireless telecommunications products and services. Market cap at $126.27B, most recent closing price at $74.41.

 

3. QUALCOMM Incorporated (JNPR, Earnings, Analysts, Financials): Provides business and mission critical communication products and services for enterprise and government customers worldwide. Market cap at $16.73B, most recent closing price at $64.60.

 

4. QUALCOMM Incorporated (MSI, Earnings, Analysts, Financials): Provides business and mission critical communication products and services for enterprise and government customers worldwide. Market cap at $16.73B, most recent closing price at $64.60.

 

5. Google Inc. (GOOG, Earnings, Analysts, Financials): Google is the world's most popular search engine. Market cap at $392.92B, most recent closing price at $1,177.44.

 

 

(List compiled by Chris Lau. Information sourced from Zacks Investment Research.)

 

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Nokia Inc. (NOK, Chart, Download SEC Filings) QUALCOMM Inc. (QCOM, Chart, Download SEC Filings) Juniper Networks, Inc. (JNPR, Chart, Download SEC Filings) Motorola Solutions, Inc. (MSI, Chart, Download SEC Filings) Google Inc. (GOOG, Chart, Download SEC Filings)

 

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