NOKIA is looking interesting

NOK closed down 7.58% to $20.62 at a cheap 9.73 P/E according to Yahoo Finance. Don’t forget the 3.5% dividend. A pretty good dividend in the tech sector.  Nokia has little debt ($1.93) , tons of cash ($11.68), respectable operating cash flow ($9.91B), and most importantly no sub-prime exposure 🙂

Ok, I’m talking my book here. I long NOK since $22. It looked cheap to me at $22. It look cheaper at $20 and change. I’m not buying at $20.62 yet. I want to see more market reaction before I move. If the market gives me an entry point next week, I’m going to add to my position.

If NOK is so cheap at $22 than why it tumbled down to $20 you asked? Well, because management come out and said they didn’t cut price to keep market share as rivals’ aggressive pricing cut into Nokia’s handset market share. You know, sell one at a lost and make it up with volume or something like that. Nokia doesn’t give a ****. Nokia is stubborn like that. This is not the first time Nokia shows its stubbornness. When Motolar and other cell phone makers took Nokia market share with their clamshell phones, Nokia could have jumped on the bandwagon and do a me-too clamshell phone. But no, not Nokia, they’re not bandwagon hoppers, they waited and waited until NOK dropped down to $11 in mid-2005. I jumped in and picked up some NOK when it started to move up at $14. Management turn things around and the rest is history. I close my position with more than 20 points profit 12 months later. What’s the lesson learned here? Stubbornness is good? Have faith in Nokia management? No! I don’t believe in any of that. I believe in numbers. 9.73 P/E is cheap in the midst of moderate growth large cap tech company. Management did not say their earning is going down, so NOK P/E is not going to shoot up without share price moving higher.

I love the work Trolltech (a recent Nokia acquisition ) did. If Nokia can levage Trolltech’s software and software development talents, it should be interesting to see if Nokia can improve their mobile software to give RIM and Apple a run for the money. High value (profit) smart phone driven by innovative software is where the money is.

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