Nokia’s Turnaround Won’t Be Pretty

Focus: STOCKS

Jim Jubak Image Jim Jubak Founder and Editor, JubakPicks.com

But the growing numbers of analysis projecting the company’s imminent death are likely mistaken, writes MoneyShow’s Jim Jubak, also of Jubak’s Picks.

In its last update on Nokia (NOK), Standard & Poor’s put the alternatives in front of the company and investors this way.

  • 30% chance that the company goes broke, and in bankruptcy equity investors recoup nothing.
  • 40% chance that the company is acquired/merges/liquidates for something like the $2.50 an ADR (American Depositary Receipt) that S&P estimates as the value of its intellectual property (patents and the like).
  • 30% chance that the company completes a successful turnaround and is worth $5 a share 12 months from now.

I’d agree with that list of alternatives for Nokia. (The stock is a member of my Jubak’s Picks portfolio.)

But I disagree with the odds that Standard & Poor’s places on the alternatives, and to a lesser degree with the target price they calculate for the second and third alternatives.

If Nokia were to go bankrupt, equity investors would indeed probably recoup nothing. But I’d put the odds of that happening at 10% or less.

For Nokia to liquidate through bankruptcy, management would have to be really, really stupid—and very unlucky. (Not that stupid and unlucky aren’t possible.