Are RIM and Nokia Worth Less Than Their Brands?
Nokia (NYS: NOK) may be a better value than you think.
Interbrand has published its annual list of the world's most valuable brands.
The big headline in the report is that Apple (NAS: AAPL) , fittingly enough, has knocked Nokia out of the top 10. It's not really a surprise. Apple is hot. The Finnish handset maker is not. However, there's perhaps a more intriguing valuation story that needs to be explored.
Interbrand pegs the value of Nokia's brand at $25.1 billion. Yes, this is a 15% slide from the brand's worth of $29.5 billion a year earlier. However, Nokia's sharp stock slide tells an even grimmer tale. Mr. Market believes that all of Nokia is worth just $19 billion. Adjust Nokia's market cap for its oodles of cash and we're left with an enterprise value closer to $13 billion.
Really? Nokia may be a fading player in mobile, but is it worth that much less than its namesake brand?
If the market isn't wrong, then it has to be Interbrand. After all, even though this is played up as a list of global brands, Nokia getting bumped from the list leaves all of the top 10 slots occupied by American companies. Surely there must be something with the five criteria that Interbrand uses to assign value.
Nokia is an extreme case here, but there's another interesting mobile valuation argument to be made if we go several notches down the list.
Research In Motion's (NAS: RIMM) BlackBerry clocks in at No. 56 with a brand value of $6.4 billion. The Canadian smartphone pioneer's battered shares now reflect a value of $7 billion. RIM isn't trading below its brand value like Nokia is, but it's getting there.
Cynics will argue that Interbrand has it wrong. The Nokia and BlackBerry brands are fading faster than they can compute. Surely one -- if not both -- of these companies would have been bought out by now. Heck, we're not even baking in the billions that Microsoft (NAS: MSFT) is reportedly paying Nokia to champion its Windows Phone platform (unless, of course, the assumption here is that Nokia selling out to Mr. Softy is going to further diminish its brand).
These are certainly interesting times in mobile.
RIM closed out its latest quarter with a record 75 million BlackBerry users. Nokia remains the undisputed global leader in traditional feature phones in a world where the masses won't be affording a smartphone with costly data plans anytime soon.
I've argued recently that RIM will die an old maid. It's too proud to realize the gradual fade toward irrelevance that's starting to take place. Nokia, on other hand, is a more likely buyout candidate here. In the spirit of our CAPScall initiative, I'm entering a bullish Nokia call on Motley Fool CAPS. If Microsoft won't put a ring on Nokia's finger, surely somebody else will if it gets any cheaper.
There no denying that the next trillion-dollar revolution will be in mobile (and that's not just lip service, it's the name of a new free special report that you can check out now). However, no one seems to be inviting RIM or Nokia to the revolution.
At the time this article was published The Motley Fool owns shares of Apple and Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft and Apple, as well as creating bull call spread positions in Microsoft and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.