The two biggest value drivers for Nokia are its net cash and its patent portfolio. Although Nokia is in the process of spending $1.6 billion in order to restructure, it still ended the quarter with $5.2 billion in net cash. We’ve already seen some of that $1.6 billion factored into its cash burn, so I feel very comfortable sticking with my expectations that $3.6 billion will be left over by the end of 2013, losses included.
Nokia’s patent portfolio is another often overlooked gem. Nokia’s roughly 10,000 patents generate $650 million in revenue annually, and very easily could fetch anywhere from four to 10 times revenue. InterDigital (Nasdaq: IDCC ) received just $221,000 for each patent it recently sold to Intel, while Nortel’s patent sale to the Apple (Nasdaq: AAPL ) , RIM, and Microsoft consortium fetched $750,000 each. Conservatively, this patent portfolio is worth $4.5 billion to $5 billion.
We also can’t overlook Nokia’s plant equipment and inventory. I’ve heard that Nokia’s $2.2 billion in inventory could be written down to zero, but I find that highly unlikely. Similarly, Nokia has $1.7 billion worth of property and plant equipment. Both figures here are down from the prior quarter but, combined, could still garner $1.5 billion at a discount.
Finally, there lies the potential that Nokia could split its operations into its three components: location and commerce (I.e. its Navteq brand); the Nokia Siemens networking business; and its devices and services operations, in order to unlock value. Even with Nokia’s dismal quarterly loss, its Navteq brand is still growing, and shows promise across smartphone networks, and its networking solution business should still command around $1 billion.