<p>Say it’s not so. In a recent speech, US Attorney General William Barr spoke of an idea to combat the ongoing issue of how to solve a problem like Huawei? The idea was that the US would take a controlling interest in Nokia (NYSE: NOK) or Ericsson (NASDAQ: ERIC). Or how about this, both?
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Teddy Roosevelt must have rolled over in his grave and shouted “What in Andrew Carnegie’s name is happening here?”
Should the US government participate in a bizarre show of reverse trust. The answer is not saying Vice President Mike Pence and White House Financial Adviser Larry Kudlow. Kudlow went so far as to say, “(the)” US government is not buying companies, whether they are domestic or foreign. “
However, that speculation was one of many rumors that gave the NOK share a lift in January. And as a result of the administration’s dismissal of rumors, investors are dismissing NOK shares. But to be fair, the idea that the United States is engaging in corporate socialism should have been enough to make investors flee.
Huawei is still a problem for Nokia
The state-owned Chinese company is the world’s leading provider of fifth generation (5G) mobile internet hardware.
The United States accuses Huawei and several of its subsidiaries of efforts to enforce intellectual property rights of US technology companies as part of a systematic effort to grow and run Huawei’s business.
As 5G infrastructure begins to be built worldwide, the United States hoped to expect the United Kingdom and Europe to ban the use of Huawei equipment during the expansion phase. But the British government announced in January that it would not ban Huawei and the European Union has given the same indication.
But whether Huawei is actively involved in taking action to steal intellectual property, it is not Nokia’s interest. Huawei represents low-cost competition. And with Ericsson already in the field, Nokia already has enough of that.
Nokia continues to be bound by rumors of takeover
After the White House rejected the idea of a takeover, Nokia continued to be the subject of rumors of takeovers. A rumor suggested that Nokia and Ericsson would merge. Another suggested that perhaps a company like Apple (NASDAQ: AAPL) should enter into a strategic partnership with the company.
And it is possible that the US can still mediate a deal between Nokia and another private sector company that uses tax incentives like a juicy carrot.
In any case, it seems that the message to investors is clear. Without some kind of help, Nokia cannot invest. And that announcement is played out in the share price of NOK. The share has decreased by almost 40% over the past 12 months and is basically flat for 2020.
With friends like these …
Nokia is in the middle of business and politics. And that’s on the wrong side of both. I do not suggest that the US Government’s fight with Huawei is not worth fighting. That is absolutely it. But it is unclear how a takeover of Nokia or Ericsson or both would do anything to alleviate these fears.
And that leaves Nokia in trouble. As my InvestorPlace colleague Vince Martin points out, NOK shares are a bargain right now. And the stock price is even lower since Martin’s article. But as Martin also points out, the stock‘s bullish dissertation depends on a story that investors have heard before. And Tom Taulli wrote that Nokia’s own guidelines indicate that their revenue growth is expected to be virtually zero by 2020.
I would suspect that Nokia will get a look from retailers. But right now there is no catalyst to move it higher. And without it, it looks more like the same for NOK shares.
At the time of writing, Chris Markoch had no position in any of the above securities.