3 Ways Nokia Can Still Make Money
The Nokia we know today will be a drastically different company once its sale to Microsoft goes through next year (pending regulatory approval). Its handset devices will be gone, but the Finnish company will still have three key areas it can profit from.
Finding a solution
In an investor presentation earlier this week, Nokia laid out one of the most important ways it will continue to produce revenue: network solutions. The Nokia Solutions and Networks segment -- or NSN -- already made up about 45% of the Finnish company's sales, with $3.6 billion in revenue in the second quarter of this year.
NSN makes data and telecommunications equipment and is a "world specialist in mobile broadband" and No. 2 in LTE, according to Nokia. The Wall Street Journal reported recently that NSN made up 90% of Nokia's revenue in 2012, if you exclude the mobile phone division. Earlier this summer, the company purchased back the 50% stake Siemens AG had in NSN, so Nokia will enjoy all of the revenue going forward.
Mapping the here and now
Albeit a smaller part of Nokia's overall business portfolio -- about 4% right now -- the company's HERE mapping service and platform is used in four out of five cars with in-dash navigation.
Part of Microsoft's purchase of Nokia's devices is that the company will also license Nokia's maps for four years. Nokia said in a presentation that Microsoft will become one of the top three HERE customers and that, "This revenue stream will substantially replace the revenue stream HERE is currently receiving from Nokia's Devices & Services business internally."
That's good news for Nokia and its investors, considering that revenue from HERE was $307 million in the second quarter of this year. Just a week ago the company launched a new version of HERE Auto -- and a companion app -- which allows users to download maps so they can access routes without an Internet connection.
Advancing existing tech
Nokia's third existing revenue stream will come from its "Advanced Technologies," which is a fancy name for its patent portfolio. The company has about 10,0000 patent families and 30,000 patents and applications, with about 1,200 of the patent families "declared essential to communications standards." The company has said that two-thirds of its current patents will still be "in force" over the next 10 years.
The patents include connectivity, sensing, materials, web technology, and cloud computing. Microsoft agreed to pay Nokia $2.2 billion for the use of its patents for the next 10 years, with an option to extend that license afterwards. Patents have become one the most sought-after (and fought for) aspects of the mobile industry, and Nokia's patent licensing could prove lucrative for the company, particularly if a company seeks to buy the patent portfolio in the future.
The new Nokia
Although Nokia will be a very different company next year, these three businesses could help it focus on revenue streams that may not have received the same attention when the devices division was around. With Microsoft having a hand in two out of three of them -- and shelling out the money for them -- Nokia can enjoy bringing in revenue while it continues to pursue other companies for use of its solutions, mapping, and patents.
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The article 3 Ways Nokia Can Still Make Money originally appeared on Fool.com.Fool contributor Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. 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.
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