Third Point LLC Purchases a Significant Stake in Nokia Corp
Third Point LLC has acquired shares in Nokia Corp following Microsoft Corp’s $7.2 billion purchase of the Finnish technology firm’s lackluster handset unit. The New York-based hedge fund owned by investor Daniel Loeb did not disclose what percent of total shares it bought. But it hinted that after the transaction, Nokia’s cash reserves reached $11 billion.
Third Point expects Nokia to use the excess of its cash on hand to either launch a share buyback or to distribute special dividend to its shareholders. But it implied that it prefers if Nokia would distribute the amount to its shareholders in the next quarters. This initiative would help entice more investors to what it calls as the ‘new Nokia’
The so-called ‘new Nokia’ would comprise of three major businesses that were left in the company’s current portfolio. Those are the wireless networks division, the mapping business, and the Advanced Technologies, which hold numerous patents. Each of the three is expected to generate positive and free cash flow. These would also give the company a different operational and strategic profile.
The recent sale of Nokia’s device business to Microsoft has logically drawn much attention. Third Point cited Nokia’s past acquisition of Siemens AG as enough reason for optimism these days. That transaction helped it revamp its joint venture called NSN, which returned to profitability after that.
As in the case of NSN, restructuring efforts launched through the years led to more profitable operations. That happened while the structure of the market has also improved after years of consolidation and ahead of the global upgrade to 4G.
Now, Nokia has much greater control of its strategies and prospects for its business. Third Point believes that it would take time before the overall investment community appreciates and absorbs the repositioning of ‘new Nokia.’
Inside Nokia, most of its investors and its analysts have applauded the recent deal with Microsoft. That is because the amount involved was greater than how much they thought the business could be. Former CEO Stephen Elop was also appreciated for his important but at times shocking decisions. He was a former executive at Microsoft, a fact that resulted in many doubts and questions about his integrity to head Nokia. Some observers could not help but wonder if Elop rose to the ranks of Nokia just to facilitate its pending sale to the giant software company.