Activist Daniel Loeb’s Third Point LLC took a stake in Nokia Oyj (NOK1V) in anticipation of dividends after a division sale to Microsoft Corp. (MSFT), adding pressure on the telecommunications-gear maker to disclose plans for its cash.
Nokia’s cash pile is set to expand to more than 14 billion euros ($19 billion), the highest on record, after it receives 5.44 billion euros for selling its mobile-devices unit to Microsoft. Either a special dividend or stock buyback is possible, Loeb said yesterday in his quarterly investor letter. Third Point bought Nokia shares late in the third quarter.
“At our purchase price, we seized an opportunity to create new Nokia at a substantial discount to target value,” Loeb said. He didn’t specify the size of his Nokia stake.
Nokia, based in Espoo, Finland, will become a manufacturer focusing on wireless networks after selling its unit making smartphones, tablets and basic mobile phones to Microsoft. Nokia said last month it is evaluating its strategy and capital needs and that excess capital would be returned to shareholders.
Activist funds generally buy stakes in companies and try to force corporate management and boards to make changes that boost share prices and investor returns. CF Industries Holdings Inc. raised its dividend by 150 percent about two months after Third Point demanded the fertilizer maker raise its payout.
Nokia shares rose 0.4 percent to 5.29 euros at 11:52 a.m. in Helsinki, valuing the company at 19.8 billion euros.
James Etheridge, a Nokia spokesman, declined to comment.
Nokia needs to balance shareholder demands for cash rewards with spending needed to run and expand its business. Seeking to challenge Ericsson AB and Huawei Technologies Co. in mobile-phone networks, the company is evaluating buying the wireless unit of France’s Alcatel-Lucent SA (ALU), a person with knowledge of the matter said last month.
With analysts’ estimates for the price of the Alcatel-Lucent wireless unit ranging from 1 billion euros to 2 billion euros, Pohjola Bank has said Nokia will also be able to resume paying a dividend of as much as 40 cents a share. Nokia’s net cash, or cash minus debt, will be about 8 billion euros after the unit sale to Microsoft, Loeb said.
While targeting Nokia’s cash, Loeb also expressed confidence in Nokia’s remaining businesses. After buying out partner Siemens AG (SIE) from its networks unit, Nokia now has greater control over the business’s operation and strategy, Loeb said.
“The repositioning of the ‘new’ Nokia story will take time for the broader investment community to absorb, which allows us to initiate the position at such a significant discount,” he said.
This year, Loeb’s Third Point has also built up a 6.9 percent stake in Sony Corp. and bought a $113.7 million stake in Walt Disney Co. as the billionaire seeks higher returns.
Nokia’s sale of the mobile-phone business to Microsoft was announced Sept. 3 and is expected to be completed in the first quarter, handing the company cash of 3.79 billion euros for the phone division plus 1.65 billion euros for patents.
One of the first smartphone makers, Nokia dominated with a global market share topping 50 percent before Apple Inc.’s iPhone and Google Inc.’s Android software were introduced about six years ago. Nokia’s market share has since collapsed to about 3 percent, according to IDC. The slump has pushed Nokia to losses and forced it to cancel its dividend for the first time in at least 143 years.