Nokia is staging a comeback to the Smartphone arena: The rumors are getting stronger

A couple of weeks ago, I’ve wrote an article for TalkMarkets where I defended the idea that Nokia (NOK) could be pursuing a return to the smartphone arena. At the time I argued that Nokia should return to the smartphone industry through a large or a small acquisition. Now, we have Re/Code citing sources stating that Nokia is preparing a new smartphone made in-house.

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(Source: Kārlis Dambrāns)

If the rumors materialize, this will be the first mobile device that Nokia will launch since selling the Mobile Phones unit to Microsoft (MSFT). Re/Code sources state that Nokia Technologies, the unit holding the mobile patents, is the responsible for the conception and design of the new device. This is the leanest approach to a comeback, doing in-house design and conception, leveraging the portfolio patents and outsourcing manufacturing and distribution. This way the risks are reduced, but the pace of innovation is also slower. All-in-all, this might be positive in the sense that it puts a foot in the door of the smartphone market and also gives time to the company to figure out where to focus its attention.

The timing of the acquisition of Alcatel-Lucent (ALU) is also interesting, since it will bring more patents to the company and liquidity. However, ALU’s balance sheet is not that rosy and the integration in Nokia will mean a deterioration of the debt ratios.

Bottom-line: Very interesting news, but the short term impact will be much reduced. All the attentions will be centered in the ALU’s integration in Nokia and this might be a long digestion since Alcatel has been showing very poor results for a long time.

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