Nokia: Cash Burn Problems Could Lead To 'Bailout' - article
equity analysts expect that Nokia
(NOK) will
burn cash of $2.5 billion over the next three quarters. This
will be a repeat of what happened in the last five quarters
where it lost
$2.1 billion of its cash reserves. Given this
rate of cash burn, the
company's ability to repay its
shorter-term bond could be a big issue to this
ailing
company.
The credit ratings agencies have already downgraded
Nokia
to "junk" status and gave the company a negative outlook.
it
seems that the company's cash balance is equivalent to
seven quarters worth of
spending. It has a maturing bond
obligation of $1.59 billion in 2014.
Unless sales of its
Lumia pick up speed, Nokia may be standing on a real
burning
platform.
Given the cash burn that the company is experiencing
now,
it may need a 'bailout' from the bigger companies. There is
speculation
that Microsoft will have to infuse cash for its
struggling partner. Microsoft
has cash in excess of $60
billion, which can be used to acquire Nokia
valued at $10.38
billion. Assuming that Microsoft will buy Nokia, it could
acquire it for 87% of its book value.
Nokia is an
elevator with the down button stuck on. It
just set another 52 week low -
$2.68 - just 68 cents away
from trading on the pink sheets. I hope
Microsoft buys
it, and Nokia becomes a mill stone around their neck.
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