Sell off the family silver and before long buyers eye the other heirlooms. News this week that Nokia will not part from its handset business until April is no shock: the sale to Microsoft needs regulatory nods and China’s antitrust processes grind slowly. But since the deal was struck last autumn, investors have been assessing the rest of Nokia: its NSN telecoms equipment business, maps unit and patent portfolio. As the shares’ volatility shows – moving between €2.60 and €6 over the past year – this is not simple.
Nokia is capitalised at €20bn. Net cash at end-2013 was €2.3bn and Microsoft will provide another €5.4bn. Deduct that, and the enterprise value is €12.3bn. Rivals Ericsson and Alcatel-Lucent trade on 6.5 to 7.5 times 2014 consensus earnings (pre-interest, depreciation, amortisation and tax). So multiply the market consensus for €1.6bn of ebitda at Nokia this year by 7, say, and the current price looks a little rich next to its peers’.
The range of analyst estimates for ebitda is wide, however: between €1.2bn and €2bn. The tricky bit is not the NSN business, which looks fairly stable. Its 2013 sales were down but its gross margins rose – much like rivals’. And Nokia has guided to a 2014 operating margin at the top end of NSN’s 5-10 per cent long-term range, in line with the 2013 figure.