Former mobile phone king Nokia (NYSE:NOK) who has made more headlines in the past two years for the things they have done wrong rather than have done right, rose on Friday on vague and unsubstantiated rumors that they were a candidate for being bought. Shares of the beleaguered phone manufacturer rose above $3.00 for the first time three weeks closing at $3.02 per share.
With a current market cap of just $11.3 billion Nokia could be acquired for far less than the what the company’s patent portfolio is likely worth. The two companies at this point that make the most sense are Microsoft (NASDAQ:MSFT) and Facebook (NASDAQ:FB). Microsoft makes sense because of their relationship with Nokia over Windows Phone and Facebook because they need to extend their brand into the mobile space in a way that allows them to monetize their loyal following. Frankly, it would allow Facebook to monetize something that wasn’t taking a cut off of Zynga’s (NASDAQ:ZNGA) value-added pie.
Here’s the dope though. If Nokia’s prospects are so poor and the company’s cash burn rate is so bad that it’s not going to survive the next twelve months as is the opinion of the bearish of the bears (who, IMO, are just talking their book, boiler-room style) then why would anyone shell out money now to buy something they can have for pennies on the dollar later. Nokia’s market cap is mostly justified by their huge cash position, and who buys cash with cash?
I promised myself I wouldn’t bring up the Fed in this article. Oops!
Microsoft is not one to make big acquisitions, they would rather throw money in as an investor (like they did with Facebook early on) and support their partner using cash to build something, namely phones and market share.
Previous Post » Global Shares, Euro Rise