In daily life, the symbol of power & influence is to be "unchallenged". But in the business world, the ultimate compliment is when a prospective competitor makes a financial decision that actually puts downward pressure on its stock price, just for a chance to reduce your market share. The very attempt to challenge your position or block the achievement of your objectives is the most credible confirmation that you have become a force to be reckoned with.
Huawei has just received such a compliment from the Microsoft/Nokia alliance. Was the compliment promising enough to merit increased investment in Huawei's future (both as an investor & as a consumer)? Let's take a look at the investment landscape & find out.
The State Of The Finnish Economy
Georg Franz Stockmann established the Stockmann retail store in Helsinki in 1862. It went on to become the largest retail chain store in Finland, Denmark, Iceland, Norway & Sweden. It was one of the crown jewels of the Finnish economy...until sales crashed, forcing it to conduct a massive downsizing operation & close down a number of its branches both at home & abroad this year.
According to international analysts, the fault does not lie with Stockmann management, but with the Finnish economy. It never recovered from the 2008 Financial Crisis, & is still in the depths of recession nearly 5 years later. Unemployment is currently staggering at 8.5% (latest figures); the budget deficit is over 10% higher in 2014 than it was in 2013. The biggest blow to the economy came in the form of the bankruptcy of the Nokia handset business.
As long as there is life, there is hope...but the majority of Finns think that, unless the Government of Finland comes up with a solution soon, the economy is pretty much "Finnished"!
Nokia Acquires Alcatel-Lucent For US$16.6 billion
So imagine every stock analyst's shock when the news broke of Nokia's acquisition of French telecom firm Alcatel-Lucent for a respectable US$16.6 billion in stock! Not even a full year ago, Microsoft announced its acquisition of Nokia's handset division & went on to discuss the various measures it would have to take in order to drag the struggling business out of the bankruptcy abyss. Nokia was such a mess that most analysts were convinced that the recovery process would take at least 3 years (best case scenario)...& considering Microsoft's lack of experience in running a telecom business, most said the acquisition was more a desperate-times-desperate-measures strategy for Nokia, than a well-thought-out plan.
This opinion is borne out by the following facts: Alcatel-Lucent's stock price has dropped over 1%, Nokia is down over 0.5% & Microsoft has lost nearly 2%...this week's last trading day alone!
Huawei Launches 2 Flagship Smartphones In London (P8 & P8max)
Huawei, on the other hand, is riding the wave of enthusiasm for smartphones. 2014 revenue (US$46.515 billion), operating income (US$5.521 billion), profit (US$4.498 billion), total assets (US$49.997 billion) & total equity (US$16.138 billion) are on the rise & it currently employs over 150,000 people globally. Huawei is China's largest telephone network equipment maker & the world's largest telecom equipment maker.
In addition, it has just launched 2 new smartphones, the P8 & the P8max, in London this week. It is very early as yet, but the majority of the technical reviews that have come in so far, are quite positive as to price & user experience.
Verdict
Therefore, even though there are unsubstantiated rumors in the Pakistani media that Huawei may also be involved in the investigation against PTCL for mislabelling its telecom imports (either to evade taxes or to bring in banned signals equipment), I think that investment in Huawei shares or products is likely to be a profitable step for the investor & consumer public in general.
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