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7 Things You Didn't Know About Nokia

By Anders Bylund - Feb 24, 2021 at 6:39AM

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Here's how a Finnish paper mill evolved into a global leader in the cellphone market.

Finland-based telecom equipment giant Nokia (NOK 0.62%) has been in the spotlight this winter. The stock was swept up in the Reddit short-squeeze drama, which pushed Nokia's share prices to nearly 10-year highs that were gone as quickly as they arrived. The episode also generated the highest trading volumes in Nokia's history. It's safe to say that many Nokia investors were introduced to the stock this year.

Everybody knows Nokia as the former king of near-indestructible cellphones and, more recently, as a global provider of telecom network equipment and services. That's just scratching the surface of Nokia's rich history, though. Most Nokia investors will learn something new from the list below.

A young woman, reading the newspaper, raises her eyebrows and widens her eyes.

Image source: Getty Images.

1. Nokia wasn't always a telephone company

The company was founded in 1865, long before the invention of wireless networks and mobile phones. I mean, this company is really old. Alexander Graham Bell invented the wired phone 10 years later, and the households of Europe and North America didn't have widespread access to electricity until the 1930s. The first few decades of Nokia's business history actually concern a single paper mill that later expanded into a network of pulp mills and paper factories.

2. The next big idea wasn't phones, either

Nokia absorbed another company known as the Finnish Rubber Works in 1920, allowing that business to operate under the respected brand name that Nokia had established in the paper business. The company made a particularly strong name for itself in the rubber footwear business, competing against Russian manufacturers. Rubber boots introduced Nokia to foreign markets.

3. From cables to phone systems

By 1967, Nokia had merged with Finnish Cable Works in a natural partnership that sprung from the up-and-coming cable manufacturer's need for quality rubber materials. That's where Nokia's journey into electronics really started. The paper operations were sold off piece by piece and then followed by a complete separation in 1988 from what's now known as Nokian Tyres.

A young woman squints at her smartphone.

Image source: Getty Images.

4. Pulling the cellphone market up by the bootstraps

The company was an early leader in wireless phone technologies. The first phone call made over the GSM standard was achieved with Nokia equipment. By 1998, Nokia had become the market-leading cellphone maker we all remember from the pre-smartphone days, followed by a sharp shift into the network equipment market in 2011.

5. Change of plans

Nokia's popular voice-and-text phones just couldn't compete with game-changing Apple (AAPL 0.17%) iPhones and Alphabet's (GOOG -1.29%) (GOOGL -1.34%) Androids. Nokia sold its mobile devices division to Microsoft (MSFT -0.23%) in 2014, shortly after the acquisition of network equipment assets from German rival Siemens. In 2015, Nokia also picked up French-American peer Alcatel-Lucent in a $16 billion deal, essentially completing the shape of the company we see today.

6. Next up: 5G networks

Nokia was not only an instrumental developer of the 5G wireless networking standards, but also one of the leading names in the 5G hardware market. 5G products are sold at a premium, generating stronger profit margins as the 5G revenue stream grows.

"We will invest whatever it takes to win in 5G," Nokia CEO Pekka Lundmark said in early February's earnings report. That sounds like a profitable business plan that can generate sustained bottom-line growth for the next few years.

Two smiling young people are surrounded by a whirlwind of hundred-dollar bills.

Image source: Getty Images.

7. Nokia looks like a buy right now

Way back in November 2020, before the Reddit-powered mania and the resulting price spike, I picked up a few Nokia shares for myself. The Reddit episode is behind us, and Nokia's stock has cooled down to a reasonable valuation again.

This is still a global power player in the explosive 5G market and the stock is trading at bargain-bin prices. You can pick up Nokia shares for 14 times forward earnings and 0.9 times trailing sales. This is the only stock among the Reddit short-squeeze targets I wouldn't mind buying today.

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Alphabet Inc.
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