 "Nokia's patent deal with Samsung puts off investors, hits shares")
Nokia said it had settled a lengthy patent dispute with South Korea's Samsung on Monday, but investors were disappointed by the financial terms of the deal.
Nokia's shares fell more than 10 per cent after the Finnish firm, headed by Rajeev Suri, said the Samsung deal would lift patent unit Nokia Technologies' sales to around Euro 1.02 billion ($1.1 billion) in 2015, from Euro 578 million in 2014.
The patent business is set to become a smaller part of Nokia after its proposed Euro 15.6-billion takeover of French network gear rival Alcatel-Lucent, whose shares fell by 11 per cent following news of the Samsung patent deal. Samsung's stock was up by 1.1 per cent.
The annualised run-rate for its patent unit following the Samsung deal is now about Euro 800 million, Nokia said. This compared with average analysts' forecasts for the unit's 2016 sales of about Euro 900 million. "There have been expectations that Nokia could make more money with their patent portfolio than (rival) Ericsson… This outcome did not support that... Estimates will be revised," said Nordea analyst Sami Sarkamies, who has a "hold" rating on Nokia.
Sweden's Ericsson, which recently signed a licence deal with Apple, has a patent sales run-rate of about Euro 1.2 billion.
In 2014, Nokia sold its once-dominant phone business to Microsoft, leaving it focused on telecom network equipment while retaining a large portfolio of handset patents.
Samsung and Nokia entered into a binding arbitration in 2013 to settle additional compensations for Nokia's phone patents for a five-year period starting from early 2014.
Nokia added it expects to receive at least Euro 1.3 billion of cash during 2016-2018 related to its settled and ongoing arbitrations, including the Samsung award. Nokia currently has a similar dispute with LG Electronics . It is expected to start talks over a new contract with Apple in the coming years.
Some investors criticised the way Nokia had communicated the settlement, while expressing surprise over the scale of the share price movement given the relatively sizes of Nokia Technologies to its networks business. "The company should be more explicit, investors are left wondering for example on the Technologies (unit's) actual topline forecast for 2016," said Juha Varis, a fund manager at Danske Capital. "I'm mostly surprised over the share reaction. Considering the increasing significance of (the) network business for the stock, this is a very strong movement," Varis, whose fund owned 0.08 per cent of Nokia shares as of end-December, said.
Nokia's shares fell more than 10 per cent after the Finnish firm, headed by Rajeev Suri, said the Samsung deal would lift patent unit Nokia Technologies' sales to around Euro 1.02 billion ($1.1 billion) in 2015, from Euro 578 million in 2014.
The patent business is set to become a smaller part of Nokia after its proposed Euro 15.6-billion takeover of French network gear rival Alcatel-Lucent, whose shares fell by 11 per cent following news of the Samsung patent deal. Samsung's stock was up by 1.1 per cent.
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Nokia shares have fallen since the announcement of Alcatel-Lucent deal last April, partly due to the dilution of the patents business and also due to worries about integration.
The annualised run-rate for its patent unit following the Samsung deal is now about Euro 800 million, Nokia said. This compared with average analysts' forecasts for the unit's 2016 sales of about Euro 900 million. "There have been expectations that Nokia could make more money with their patent portfolio than (rival) Ericsson… This outcome did not support that... Estimates will be revised," said Nordea analyst Sami Sarkamies, who has a "hold" rating on Nokia.
Sweden's Ericsson, which recently signed a licence deal with Apple, has a patent sales run-rate of about Euro 1.2 billion.
In 2014, Nokia sold its once-dominant phone business to Microsoft, leaving it focused on telecom network equipment while retaining a large portfolio of handset patents.
Samsung and Nokia entered into a binding arbitration in 2013 to settle additional compensations for Nokia's phone patents for a five-year period starting from early 2014.
Nokia added it expects to receive at least Euro 1.3 billion of cash during 2016-2018 related to its settled and ongoing arbitrations, including the Samsung award. Nokia currently has a similar dispute with LG Electronics . It is expected to start talks over a new contract with Apple in the coming years.
Some investors criticised the way Nokia had communicated the settlement, while expressing surprise over the scale of the share price movement given the relatively sizes of Nokia Technologies to its networks business. "The company should be more explicit, investors are left wondering for example on the Technologies (unit's) actual topline forecast for 2016," said Juha Varis, a fund manager at Danske Capital. "I'm mostly surprised over the share reaction. Considering the increasing significance of (the) network business for the stock, this is a very strong movement," Varis, whose fund owned 0.08 per cent of Nokia shares as of end-December, said.