Time to buy Nokia?

Shares of Nokia were up 17% yesterday after Google announced it will buy Motorola Mobility. Seems like investors were placing bets that Nokia could be the next takeover target. I'm not sure this would be the best investment thesis, here's why.

First of all Google's push to take over MM was not their strategic move to start producing their own mobile phones. Google is and will be an advertising company. It was the huge number of patents, especially in wireless solutions, that MM had that was of interest to Google (more specifically around 17 000 patents and 7 000 applications). For Google the ownership of the patents could mean that its partners will receive relevant licences in competitive terms which will secure Android's market position. It's a game of patents and since Microsoft already has a partnership with Nokia there's no point in buying them.

Nokia Windows 7 phone concept
circulating in the web

For me news about order of 2 million Windows 7 Nokia phones were much more important. There are rumors around that we might see a presentation of the phone already in September and they will hit the shelves for Christmas. Another interesting rumour going around is that Nokia is producing tablets secretly without involving Nokia brand. Techradar link

So for Nokia's case the question is not whether Nokia is a takeover target but whether they will succeed with their new phones (and tablets.. if the rumours are true..). For speculative purposes I would consider taking a small position in the coming months after there is more certainty about the economic recovery and hold the position until the results of Q4 2011 since there will probably be a lot of uncertainty regarding their sales. For long-term investor I would recommend waiting for the results of christmas sale and subsequent comments before taking a position.