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Author: TMFMycroft Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35050  
Subject: 15 Point Fisher Analysis of Nokia Date: 6/22/2000 1:40 PM
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It is always good to start out an Analysis of a Company with some good news. Well I have the best news of all! The Nokia 7100 series will begin being sold in the United States on July 15th. Now how do I know this? Today I went to two different AT&T Wireless stores in my area and brought with me the Big Gun itself, The European 7110 that I bought last month. To say that the salespersons were drooling is an understatement. Having gotten their attention I asked each store salesperson when would I be able to buy the USA version. In each case I was told the week of or the week after July 15th. I then asked them how could they be so sure. In each case I was told the same thing. “We begin training next week on how to use it”. Now that my friends is how Scuttlebutt works! I was unable to determine the price it would be sold at, but was told that that Nokia has been producing the phones for months now, filling up warehouses getting ready for the big release. I asked if I could reserve one and was told. “Strict orders from Nokia, FIRST COME, FIRST SERVE!” The salespersons are all giddy for they know that the bonus of a lifetime is coming at Christmas time. The reason that the phone has not been released as of yet is because they are trying to get all the bugs out of the system before they release it. This is a sign of a great management, not wanting to release the phone until it is just right. They are doing the final Beta testing now. The Phone will not work on the Pocket Net technology that AT&T has for its other phones, but will work on a totally different system to be introduced specially by Nokia for this phone. I am amazed that no one has heard about it until now. The demand for this phone is just incredible from what I have been told. I am curious to find out what this new system is and what it will be called. It will be based on WAP that is for sure, but who knows what it will be called. Since I am now based in Alexandria, I can not tell you whether this will be a nationwide roll out or if it will be introduced in the Nations capital first and then the rest of the country.

Now having completed the Scuttlebutt section of the Philip A. Fisher Analysis of Nokia it is now time to do an updated “15 Point” Fisher Analysis of Nokia.

1) Does the company have products or services with sufficient market potential to make a sizeable increase in sales for at least several years?

When analyzing this point it is important to understand the Industry that the Company operates in and if that Industry's future is bright or just average. The Wireless Industry as far as I am concerned is still in its Infancy. The following post is by my buddy Rubic:
http://boards.fool.com/Message.asp?id=1190244001656000&sort=postdate

Now there are two errors in the article:

As Pointed out by my good friend TMF Czar the numbers are supposed to be "Wireless data subscriber statistics" and the numbers for Europe are more like 910,000 instead of 91,000.

I did a calculation of the Annualized 4 year growth rates of each of those regions

Europe = 198%
USA = 238%
Asia = 320%
Japan = 81%

Thus as we can see from this that Nokia is operating in an industry that is booming and will continue to boom for at least the next 4 years going forward.

There are also many changes occurring 3 years from now with 3G technologies that will allow the phone customer to see who they are talking to, download Television shows, the Internet as well as run high tech games. Nokia is a leader in this technology and is pioneering the road to 2003.

The industry itself is amazing, as it wants cooperation and assistance in shaping the future. Nokia itself is the leader of this drive for it openly asks for help from its so called competitors with postings on its website that are like this one;

http://www.nokia.com/3g/cooperation.html

When have you ever seen a company so willing to form partnerships? This is a sign of strength through helping others similar to my favorite Motley Fools saying, “learning together”! Nokia should use “Working Together” for with these partnerships they are advancing Technology at twice the speed that they would of if it were working alone.

Now to the question of increasing sales.

I firmly believe that the tremendous growth rates of the industry will be filtered through to Nokia and that they will take the largest share of the profits because of their ever-increasing market share in all aspects of the Industry in all Regions of the world. Because of these tremendous growth rates I am able to make the following estimates found in my post of a few weeks back;

http://boards.fool.com/Message.asp?id=1190244001477000&sort=postdate

2) Does the management have a determination to continue to develop products or processes that will still further increase total sales potentials when currently attractive product lines have largely been exploited?

The management has the determination to do this, but does it in a very relaxed and controlled way. It makes sure before issuing a new product that the cycle of the previous generation products have totally been exhausted and then still keeps that older line and tries to find new ways to expand it constantly building on its base and growing sales in first, second and third phases of its growth. Let me give you an example of what I mean.

A few years back Nokia introduced the Analog 918 for it saw that the United States Population as being very spread out around the country in rural blocks. If anyone has ever traveled from Denver to Virginia (which I just did in order to work for TMF) they will find that one can drive for hours with out seeing anything but farms and vast open spaces. This rural setting is not conducive to large upgrades of wireless services by the Wireless Service Provider Industry, thus the Analog phone, which is an extinct species in Cities and large towns, is still thriving in Rural America. The largest selling prepaid phone without a doubt is the Nokia 918 and it is sold through such services as TracFone, which is a reseller of airtime and has a coverage area of 99% of the United States. The phones are sold thru Ames, Radio Shack, 7-Eleven, Blockbuster and many more outlets. This is the backbone of Nokia in the United States and there are very few people who know about this area:

http://www.tracfone.com/html/homenav.html

Just investigate the site a while and you will see how powerful prepaids are.

Now to the biggest selling phones in the USA, the 5100 and 6100 series are sold in all technologies TDMA, CDMA and GSM. They have been around about 2 years now and sales have just been blazing ever since their introduction. Entire companies like Voicestream wireless do or die by these phones. AT&T wireless had a huge promotion when they came out and sold so many that Nokia constantly had run out of supply of them. The delay of the 7100 series is do to the success of the 5100 and 6100 series. Now that they have sold so many, Nokia is content to upgrade in the summer where everyone is on vacation and sales are slowest. They will introduce the new 7100 series in July and will allow 5 months for the phone to catch on and make a killing in the Christmas season.
Thus we have a complete cycle of one phone generation replacing the other but not eliminating it. All the generations will work together in unison waiting for the BIG BOY!! The 3G phones which one cannot believe they will be able to do the things that the industry is promising they will. I am very excited about the future for the Industry and for Nokia.

3) How effective are the company's research and development efforts in relation to its size?

As the company continues to grow its Research and Development group expands also. Nokia for years has keep their R&D Budget at a consistent percentage of Sales which tells me that Nokia has such an amazing control over their finances that they can adjust for any scenario that comes up. One of the things that Philip Fisher demands of a company is that it show Consistency. Here is a perfect example of that as shown by its R&D as a % of Sales:

1996 = 8.9%
1997 = 8.7%
1998 = 8.6%
1999 = 8.9%

For a company whose sales have gone up 198.97% in the last 4 years it is amazing that they can plan out their strategy so well. Now is the R&D effective enough to justify these large budgets:

Here are just some recent products that are not even in the phone area, which R&D has developed in the last few years.

http://www.nokia.com/multimedia/mediascreen.html

http://www.nwr.nokia.com/rooftop/index.html

http://www.nokia.com/syncml/index.html

http://www.nokia.com/multimedia/9800/index.html

the last one can access 2000 channels!!!!

4) Does the company have an above average sales organization?

The way one judges a sales organization is by asking the competitions sales force about the company. Every time I meet a Ericsson or Motorola Rep I always ask then the question “ Are you a Nokia Rep??” There answer is always “I Wish”!

When you see that every time you ask, you know something great is going down at Nokia Sales. I had a chance to meet a Nokia Sales Representative in Seattle while shopping in Radio Shack of all places. You could tell from talking to him that he had the greatest job around (except being a Stroller for TMF of course!) and he was so proud of the company. One can judge a sales force by how it delivers the product to the consumer. Coca-Cola who has its share of problems these days still has the best distribution and sales force on the planet. The way you know this is to think back. Have you ever been anywhere in the world and not seen a Coca-Cola product within a 20 minute car ride or walk. Have you ever seen an empty shelf in a supermarket? I have not! Nokia in comparison to its competition is leap years ahead in distribution. The only problem is that the demand is 2 to 3 times the supply, therefore even running at flat out full capacity the company can not keep up with demand though they are constantly building new factories. The sales force has to deal with these limitations placed on them and is doing a hell of a good job, that's for sure!!! The true test will be the 7100 rollout.
This I am looking forward with great curiosity to see how they will perform.

5) Does the company have worthwhile profit margins?

These are the Profit Margins for Nokia

1996 = 7.7%
1997 = 11.4%
1998 = 12.6%
1999 = 13.0%

When compared to Motorola

1996 = 4.1%
1997 = 4.0%
1998 = -3.3%
1999 = 2.6%

Thus we are not doing badly in that department.

When it comes to this Fisher Point I side with Warren Buffett who likes to see growth in Return on Equity once a strong profit margin is established.

Return on Equity for Nokia

1996 = 20.5%
1997 = 32%
1998 = 38.5%
1999 = 41.3%

Nokia's Book Value has grown 176% in the last 4 years and per year annualized it has grown at 29% a very healthy number from a Buffett perspective. What he looks for is growth of book but also growth of Return on Equity as well.

To give you an example how important this is, we can take the case of Cisco Systems. If this company has one flaw it is its falling Return on Equity numbers. I for one cannot explain this phenomenon ?

Return on Equity for CSCO

1996 = 32.4%
1997 = 24.5%
1998 = 19%
1999 = 17.9%

Now its Book Value has grown at an annualized average of 43% for the last 4 years while its net income has grown at only 23% compared to Nokia's that has grown at 49.8% for the 4 year average annualized. My advice to CSCO shareholders is to get management to stop buying other companies and start building. For it seems they are buying the companies but are getting a lot of Equity in the deals with little in the way of Net income growth.
This is one of the reasons I have not bought CSCO for my portfolio as it passes with flying colors on the Qualitative side.

6) What is the company doing to maintain or improve profit margins?

The answer to this question is very simple, they are building their products in the country or region where it will be sold. Thus shipping costs are minimized and profits maximized.
Also the phones of the future will carry a higher cost for the service providers who in turn will make more profit from them in higher added services, like SMS(Short Messaging services) and WAP (Wireless Application Protocol). I am very excited that China has been granted permanent status by the US Government for now they will open their doors and will allow Nokia to manufacture all their accessories there. Thus reducing their costs dramatically. I am already seeing signs of it as I bought an AT&T Nokia headset today and it was made in China. Nokia is courting China tremendously these days for they know how important it is to the future of Wireless and with their huge population it is important to be very friendly with them. In 1996 they hired the former Secretary of State for Finland, Veli Sundback and gave him the position of Executive Vice President for Corporate relations and Trade Policy. This was a brilliant move for Chinese Government officials love to talk with other government officials and are not comfortable talking with Capitalist businessmen. We are lucky that Finland is non-political and is very friendly with all nations. This is a major benefit for a shareholder, for there is little threat of surprises, like what happened to Qualcomm last week. The struggle on the Political front between the USA and China is a area of uncertainty that will dog American companies for years to come. As to maintaining the profit margins, I do not see Mobile phone prices coming down that much. That was the fear last year, but it has been proven wrong. The 6190 was selling for $149 at Voicestream when it came out last year and it is running about the same price now. Nokia makes products that are affordable as a fashion or luxury item that can be had by the average consumer. This is a strength, which few have noticed. People are buying these phones for their friends have them and Nokia is taking advantage of the peer pressure syndrome. Every kid wants one and with his or her friends starting to send SMS messages soon with the WAP generation phones. Santa will be getting long lists that he will be filling the orders for in Finland this Christmas. I am very excited about the next 5 years with this company.

7) Does the company have outstanding labor and personnel relations?

Nokia consistently is voted in the top 100 companies to work for by all the major business press. As for myself I am dying to work at TMF so I can get my hands on the pool table in the Game room and most of all I want to see what Foosball is? A friend of a friend works for Nokia in Dallas and he got to go to visit the headquarters in Finland, stay at a wonderful hotel and ski and even tried his hand at sledding. He loves working there and said that everyone else he works with loves it also. That's proof enough, not mention the wonderful bonuses that Nokia gives their employees every year for exceeding performance goals. It's not like GE for example. I have meet about 20 GE employees in the last ten years and they are not happy with Welch at all. Nokia has a friendly approach to ones work life. They want their employees to enjoy their work and their lives. The TMF has the same system and that's one of the reasons I joined up. It just seems like it's going to be a ball to work there. I just hope they don't mind dealing with an Insomniac Workaholic Posting Addict like myself?

8) Does the company have outstanding executive relations?

This is my favorite point in doing a Fisher Analysis of Nokia for they are the Global leader in this point. They have without a doubt in my 26 years analyzing companies , the best management around. You can tell that they are all buddy buddies with each other. The conference calls and the tech shows that they speak at, show a management team that is like a finely tuned Swiss watch. Nokia's CEO Jorma Ollila is in my opinion is the perfect man for the job. He was Senior Finance Vice President in 1986 when he started with the company and is a genius at the numbers end , for how else can one explain such precision income statements. He knows first hand about every dollar that goes out and every dollar that comes in.

Now for the fun part, their ages;

1) Chairman/CEO Jorma Ollila = 49
2) President Pekka Ala-Pietila = 43
3) Nokia Phones President Dr. Matti Alahuhta = 47
4) President of Nokia Networks Sari Baldauf = 44
5) Exec VP and GM Mikko Heikkonen = 50
6) Exec VP/CFO Olli-Pekka Kallasvuo = 46
7) Exec VP/CTO Nokia Phones Dr. Yrjo Neuvo = 56
8) Exec VP Corp Relations Veli Sundback = 53
9) Exec VP Eur/Africa Nokia Phones Anssi Vanjoki = 43

There's Murderers Row !!!

Average Age = Drum roll please!!!

48 years

Thus we will have this management around in some form for another 17 YEARS!!!!!!

9) Does the company have depth to its management?

Jorma Ollila has three masters degrees

Veli Sundback was Secretary of State for Finland from 1993-1995

We have two Dr. degrees where Dr. Yrio Neuvo was National Research Professor at the Academy of Finland .

Many of the individuals have held posts working in the government and are on Commerce boards in China and Japan.

Year started at Nokia and age started using numbers from above;

1) 1985 = started at age 34 with the company
2) 1984 = age 27
3) 1975 = age 22
4) 1983 = age 27
5) 1975 = age 25
6) 1980 = age 26
7) 1993 = age 49 (former College Professor)
8) 1996 = age 49 (former Secretary of State)
9) 1991 = age 34

So except for #7 & #8 we can see that Nokia grows their own Executives internally, which is a trait that I love for all these persons are Company persons who have grown up in the company and know how it functions, not like Lucent now who is having trouble finding spots for all the new employees brought in from their acquisitions.

10) How good are the company's cost analysis and accounting controls?

As I demonstrated on the R&D question, that Nokia is a precision cost control machine;

Some more examples,

Net Debt to Equity

1996 = -9
1997 = -35
1998 = -36
1999 = -41

Equity Ratio

1996 = 48.4
1997 = 52.7
1998 = 52.0
1999 = 53.3

Capital Expenditures to Sales

1996 = 5.2
1997 = 4.6
1998 = 5.7
1999 = 6.9

I am very happy about the 6.9% for I always thought that Nokia was not spending enough in this category

Return On Capital employed

1996 = 22.7
1997 = 38.3
1998 = 50.2
1999 = 55.7

Very Impressive growth in this measure

Cost of Goods Sold

1998 = 62%
1999 = 62%

11) Are there aspects of the business , somewhat peculiar to the Industry involved , which will give the investor important clues as to how outstanding the company may be in relation to its competition?

Nokia is different from the Industry it is in. Firstly it is not buying companies for its growth but is designing its products and innovating in house. When a company does not do this it risks buying a lemon when they thought they were buying a Ferrari. I like to invest in companies that grow from within. It's very rare that the opposite policy is successful and there are very few individuals who can pull it off. Beside Dr. John Malone I wouldn't put faith in anyone trying to do it. Just look what happened to Buffett and General RE. I don't like mixing cultures for its like drinking cranberry juice and peach juice. Both taste great separately but if you ever try mixing them together, watch out. Just look at the problems that Cendant or Tyco International had. The CEO of CSCO is very good at it also but I hope he never makes a mistake for it's a long way down. Lucent Technologies was a disaster at shopping on the outside. The split offs that they are attempting to do now is a direct result of the mistakes that they made in ill-timed and ill-advised buyouts of companies. Nokia in their situation would have spent all their time working on Optical Networking Products instead of losing the market share to CSCO and Nortel. Nokia is superior for they work very hard at building the business on Main Street first like Sam Walton used to do. But while on Main Street they are also very friendly to Wall Street.
Unlike everyone else in the Wireless Industry there are never any surprises from Nokia except that it be to the upside. Nokia unlike Ericsson or Motorola never warn about their earnings and are always very conservative in their estimates. Artists do the designing of their phones and thus they don't look like bars of soap, like Ericssons do. Besides that they make tons of accessories for each of their phones or offer them in a dozen colors. Everything they do is for the consumer as well as the Service Providers. Also Nokia has no problem selling off a division because it is not performing up to snuff. This reminds me of the beloved Coke CEO Roberto Goizueta. who sold the film companies and the other companies that had nothing to do with Coca-Cola. I really miss Roberto, like I miss Malcolm Forbes. Both were an inspiration to me and it's too bad they went so young.
The final thing that makes them different is that they are quick to reverse their mistakes when they make them. The big mistake that I blame Nokia for is that they have missed a tremendous amount of Sales due to their inability to come to an agreement with Qualcomm on CDMA phones. The news now though is different. In the CNBC Interview with Maria B. last Friday, Nokia's CEO Jorma stated that he will in 18 months have a similar market share in CDMA phones as he does in all the other areas. This is the best news that my old tired ears could hear, for to explain how that relates to Wall Street. He meant that Nokia is shooting for a 30% market share in CDMA phones within 18 months!! This is tremendous news for the shareholders for we will be the king of Handsets in every category. I would watch for a massive campaign to be announced between Nokia and SprintPCS and Verizon . This shows me that Nokia feels that it can do whatever it wants whenever it feels like it. We are now the 800-pound Gorilla in the wireless field.

12) Does the company have a short range or long-range outlook in regards to profits?

This is the only company where I can make estimates going out 5 years in terms of its profits. Nokia plans out its strategy by the decade and not by the quarter. Their cost controls are so well thought out that any positive increase in sales boosts profits significantly. Nokia CEO Jorma said last year that he expected Nokia to grow at between 25-30% for the next five years but then turns around and gives us an 88% return on the latest quarters mobile Phone growth rates. This shows us that they have a very conservative face to the public but know that they will easily beat even the wildest estimates that Wall Street can come up with. Wall Streets Analysts will never give a downgrade to Nokia for that would be the third rail for their career. The company is just doing everything right and has a very bright future. The phones that we see coming out now where designed five years ago in the R&D research labs. Just imagine what they are working on now!! Nokia will not play games for short-term gains. They will not buy out a Qualcomm or buy Palm for they understand that they do everything internally for the long haul. Other companies might come out with new technologies faster but then when Nokia brings the ship around and comes out with a competing product, the competition just withers and dies. You will see that with the CDMA phones that Nokia will come out with soon. People just love their Nokia Phones. Nokia's marketing is also excellent. They don't put many commercials on the airwaves for the word of mouth is their best advertising.

13) In the foreseeable future will the growth of the company require sufficient equity financing so that the larger number of shares then outstanding will largely cancel the existing shareholders' benefit from this anticipated growth?

Nokia is in complete command of the financial throttle so much so that they pay out a large sum of their earnings to shareholders in the form of a dividend once a year. They also give large bonuses to their employees at Christmas time. Their Debt to Equity ratio is negative and anytime they wanted they could borrow $billions, but they don't need it.
The cash flows from the phone sales are more then adequate to supply any future growth.
As to canceling any benefits from the anticipated growth just wait to see the Christmas present that we will receive in the form of a fantastic earnings report. The 7100 will be fully implemented into the United States as well as the 8000 series World Phone. We have had many new models introduced this year in Europe and the new I-Modes in Japan. The global demand for Wireless phones are overtaking supply as usual and with Nokia coming out with a new line of CDMA phones shortly, 2001 will be a wonderful year also.
The way Nokia is building R&D Centers we should really have some great products all the way out to the end of the decade. A ten-year plan!

14) Does the management talk freely to investors about its affairs when things are going well but “clam up” when troubles and disappointments occur?

Because of the tremendous management that is running this company, I have never seen troubles or disappointments other then the conflict with QCOM over the 6185 phone and our continued struggle with CDMA. All this should be finished by the end of 2001. As CEO Jorma Ollila has stated that he wants a 30% market share within 18 months in the CDMA market. The management besides the fact that they are in the field of Technology is very conservative. One of the secrets to their success can be attributed to their website.

http://www.nokia.com

In it one will find thousands of pages on every subject imaginable that has to do with Nokia. I have been reading it for over a year now and every time I feel I have read everything they pop up with wonderful surprises like the new Media Screen or the new Wireless high-speed connection “Rooftop”. What I have noticed with Nokia is that they have become more open in the last year since I bought the stock. This maybe attributed to their creating a position of “President for the Website”. Imagine a huge company like Nokia going to so much trouble to fill their company's website with so much information.. Then to freely exchange facts about the company that it does not by any law need to report. Remember that Nokia comes from a country that brought us Linux and is culture that thrives on openness. From the website one can read all the Annual Reports going back to 1994 as well as the press releases . They have sections specifically designed to help the investors understand the technology that they have in operation or that they are working on. I received the Annual Report the other day and was bored reading it. Bored? I was bored for I knew everything that was in it already, for I had read it all before on the website. It is the strangest feeling that I have ever had, because the Annual Report for me is the most important document that one will receive as an investor. It shows one how the Company relates to the Newbie and their attitude towards them. In other words you trying to determine how much effort they put in to helping everyone understand what's going on. Coca-Cola produces the best annual reports and one always gets a great feeling after reading them. It is full of Graphs and Market statistics on everywhere they do business. After reading the Annual Report of Coca-Cola, there is no way one could bring oneself to sell KO. I feel the same about the Nokia Website. If I were to add a 16th point to Philip Fishers 15 points it would be the following:

16) How important is the website to the company and do they use it well to explain in detail what one is searching for or is it just a jungle of mass confusion?

The masters of the perfect website are The Motley Fools. In preparing for my work I tried to print up all the information that was available on the 13 Steps to Investing Foolishly.

http://www.fool.com/school/13steps/13steps.htm

I went step by step and the printer pumped out over 500 pages. That's right there are over 500 pages of great information just related to the 13 Steps. This shows me an organization that really cares about the Newbie and getting him or her off on the right foot. The amazing thing with both Nokia and TMF is that all this wonderful information is free. They could easily package all this information and sell it to the public, but have chosen to give it away. This is admirable in an age where even the water that you drink costs you something and when you wake up in the morning as soon as you open your eyes you owe money to someone, either the landlord, the state sanitation department or the phone company.

They have a saying on Main Street. “What is your cost before you open the door?” What this means is, what fixed costs does one have (divided by 30 days (month)) compared to the revenues that the business takes in. When trying to do business on Main Street, this is the most important indicator. My Great Uncle Andrew Tsiropinas probably one of the greatest business minds of the 20th century (though no one ever heard of him) came to this country in 1910 and started with nothing. He built up a series of businesses from having numerous restaurants , Motels and had some 250 Cigarette Vending machines in NYC, where he had to compete against elements that were trying to put him out of business permanently (If you get my drift). He taught my father the restaurant business and also taught him the theory of the “Turn Key”

Turn Key Investing = Taking all the Fixed costs that are associated with your business for each month and dividing it by 30. Then take the expected sales that one has forecasted and divide it by the Fixed Costs.

By “Turn Key”, I mean to put the key in the door every morning and know what you owe before you open the door.

Most businesses go out of business in the first year for they never plan out the “Turn Key”. I can tell you on Main Street whether a business will succeed or not by just watching it for a week. My Uncle used to buy and sell businesses all the time. His secret was to sit in his car and count the number of customers and try to determine how much money they spent in the store. He knew the “turn key” costs already from experience so now he had to determine the rest. You would always see him sitting in front of some store writing down the numbers. If you saw him there for more then two days then you knew he was interested and that it was a great business. It is no doubt that he was a big investor in Coca-Cola going way back. “They sell Sugar and Water and put it in a beautiful can, Now that's a business!” he would say. He unfortunately died after having 7 heart attacks for he used to smoke five packs a day, but lived to his 80's. During World War II he would go to the local Army-Navy Store and send crates full of clothes to the refugees in Greece. He was a great man and I learned a lot from him. I am very lucky that he taught my father about Main Street and how it operates and in turn my father taught me. When he was 80 years old and was in the Hospital he saw an opportunity to sell soup , for he said the food was terrible and that he would make a killing. He tried to open a booth to sell soup but was not allowed. This is the “Money Mind” that all the great teachers from Graham to the moderns are trying to teach us . Think as a businessman on Main Street would and you will be amazed at how successful you will be on Wall Street!! When you see companies buying up other companies and merging them, try to figure out the “Turn key”. Lucent unfortunately did not in the last 2 years of wild purchases and is now paying the price for it. Ivester of Ko invested heavily in the bottlers though there was little demand for the products at that time. Instead of holding onto the cash he decided to spend heavy and restructure KO's bottling operations during the Asia Crisis. With a strong Dollar and little in cash flow coming in a year down the road meant that he was forced to borrow and thus brought even the mighty KO to its Knees. This is why management is so important. When you hear words like restructuring it is usually a bad sign for they need to fix something that is terribly wrong in the company. If the management has done their job correctly, you will never hear the word restructuring. Berkshire Hathaway, Nokia, Home Depot and Wal-Mart are companies where you will never hear the phrase mentioned for they keep their “Turn Key” so low that even in the worst of times they make money. Companies like Microsoft are great businesses for the Government is forcing them to restructure, but they refuse to. This means that their “Turn Key” is extremely low. Dr. John Malone of Liberty Media is so good at “Turn Key” Investing that he even makes tremendous returns on his own Main Street investments. He last year bought a house as an investment for he knew that it was dirt-cheap. He saw that he could invest a little money in it to repair it and then sell it for a huge profit. Which he did!! Now if a person worth $10 Billion is buying $400,000 houses and selling them, just imagine how much he pays attention to the “Turn Key” when he invests for his shareholders. You can tell a lot about a company by its management. My Father along with his brothers had a restaurant where when they sold it had revenues of $25,000 a week in 1987. The people who run it now are pulling about $15,000 a week some 13 years later. This is with a huge condominium community being built across the street with 500 units. Thus logically the business should have improved , but the management is the key. The location is perfect, the tradition of excellence was established for over the 40 years that my father ran the business, but the current management stinks. This is a lesson as to why I have given up Value Investing, for when a company gets down to what Value investors consider a bargain, they make the mistake and never check out the management. Corel or Kmart are great examples of poor management. The companies where considered great value plays but investors saw that there was no real value in them for the management was terrible.
Great investments become so over time as the companies continue to grow on Main Street. I hope some day to be able to do a Fisher Analysis of the The Motley Fool Organization for I am finding out very promising things about how the company is being run and I see great potential and a superior trademark developing here.

15) Does the company have management of unquestionable integrity?

According to Webster's New World Dictionary the word Integrity means;

1) the quality or state of being complete; unbroken condition; entirety
2) the quality or state of being unimpaired;perfect condition; soundness
3) the quality or state of being of sound moral principle;uprightness,honesty,and sincerity

When trying to figure out this point one has to concentrate on the CEO for he is manning the ship. Nokia comes from a culture that reminds me of the Ancient Greeks before Alexander. Athens in those days was the center of the world. The Greeks of that time were famous because they were driven to understand the world and try to change it. They gave us Hippocrates, Socrates, Plato and Aristotle as well as many others. Finland today is a modern example of that. It will be to the 21st century what the USA was to the 20th century, the intellectual engine of growth !! They are basing the future of the company on technology. 1000 years from now Finland will be remembered as the driving force that advanced civilization to the next level. I would move there if I could but the language is just impossible to learn and I am not one for cold climates. My uncle in Greece always said about the Ancient Greeks that they did so much philosophizing because it was too hot to work during the day and they had a lot of free time on their hands. Well this might be true of the Finnish also. Its climate is condusive to keeping their citizens indoors most of the time and in order to be sociable which the Finns are, they need to communicate some how. The mobile phone has changed the society there and is changing the world. The culture is highly advanced and is based on sharing and openness (where the USA is sorely lacking). The drive to succeed is not monetary in nature but is historical. Finland is revolutionizing the world from an Intellectual base not an economic base. In other words money is not the driving force here. Any other company would have released the 7100 series in the USA with all the bugs that it had and then charged great fees to get fixes. I just installed Windows 2000 on my computer and guess what, MSN does not support it! Now how can a company be so sloppy? Now I am using Free I Net that does support it. In other words a massive company like Microsoft with 9000 programmers cannot write a program for its MSN that a small outfit in Seattle can do in no time. Something's wrong with this picture and the mighty Microsoft has some problems on the inside. I am now waiting for the Beta AOL 6.0 to come in the mail so that I can get myself running on a major service.

I was a little worried about Nokia in the last six months for the battle that they had with QCOM was not what I like to see in one of my company's . Since then Jorma Ollila has come to his senses and admitted that he made a mistake and is going gangbusters on CDMA now preparing for a major launch to gain 30% of the CDMA market in the next 18 months. He said it himself, so I can sleep well at night knowing that I now own a complete company.

The way I will finish my report is to quote the theme of 1999 Nokia Annual Report:

NO LIMITS TO THE FUTURE

There are no limits to the human imagination.
There are no limits to our capacity for change.
There are no limits to our capability to improve.
There are no limits to our willingness to achieve.
There are no limits to our dedication to serve.
There are no limits except those we set ourselves.
There are no limits.

Welcome Motley Fool Community to Nokia with a Fisher twist!

Fool On, 'Learning Together”

To Educate, Amuse and Enrich

TMF MYCROFT
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