Principles of Finance

Introduction

The world’s appetite for technology has grown tremendously over the years. Everyone wants to lay their hands on the latest technology or at least one that is within their means. This has had a great impact in the electronic and communication market in which the Nokia Corporation has for many years maintained leadership (Nokia 2011).

The value of the company has grown and matured in the stock market and secured a position for the company in as far as investor confidence is concerned. There have been numerous alternatives of finance available for the company one of which has been equity futures. The consistent current financial profile has enabled the company convince their investors to invest their properties in the company.

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Argument

The company’s shares have for the longest time fallen below the 6 euro mark in share value with the margin of change being below 20 %. The company has undeniably been on a down ward trend with figures falling to 4.5 Euros an all time low. The quarterly outlook has shown a consistent drop in the share price (Yahoo Finance 2011).

This situation cannot be criticized since Nokia has made its move into the smart phone production. The level of sales has dropped due to the change in consumer taste in favor of Smartphone technology. This has caused the company to partner with other companies such as Microsoft to try and restore the market leadership as well as recover the 18 % plunge in profit margins (Yahoo Finance. 2011).

The share price will be expected to remain the same come next year due to the slim margins of sales that have been experiences these year. The consumer base will take time to embrace the new changes in the mobile software and therefore the shares will take time to get back to normal. This will proceed on to the first and second quarters of the year since during this time the company will be experiencing the recess period.

The third quarter will however bring in improvements in share value owing to the change in the price earnings ratio that is expected to increase. The fourth quarter will definitely record a substantial growth due to the high season of holidays and ceremonies around the globe (Arthur 2011).

He company’s risk portfolio stands at a positive side for the investor since the level of volatility of the shares against the stork markets index has a positive trend. The market share returns have a high level of sensitivity to asset returns.

This ,makes the shears more risky but much more profitable for an investor who purchases futures. Level of sensitivity. For instance, the company has made an 11.6 billion euro deal with Microsoft for the acquisition of the right to use their windows mobile software’s along with other handset applications (Orlowski 2011).

Microsoft enjoys a worldwide market leadership and command and will go a long way in improving the company’s asset value and returns. In effect the value of the shareholders wealth is expected to increase by a lesser but equally substantial margin. This has been the trends over the past few years with each change marking the introduction of a new product or a modification of an existing one. However, the share price has had a sharp margin of change which makes the stock risky but lucrative.

Besides futures, there are several other investment vehicles available in the company. Preference shares for instance attract a return that is slightly above the banks savings rate of return which makes investment in the company more profitable. There is however, a greater chance at high profitability in the acquisition of futures as compared to all other investments.

Conclusion

The value of 100 shares in the Nokia Company will be expected to rise by a fair margin (Butcher 2010). This margin will provide returns that are greater than the risk free rate of the savings and certificate deposits in banks since the company has a positive beta in as far as the market portfolio is concerned.

References

Orlowski. A. ( 2011). “Memo Gives Full Details of Nokiea Staff Cull and Closure”. The Register. Retrieved on July 8, 2011 from. http://www.theregister.co.uk/2011/04/27/nokia_cuts_memo/.

Arthur, C. (2011). Nokia shares dive after sales warning. The Guardian. Retrieved on July 8, 2011 from http://www.guardian.co.uk/technology/2011/may/31/nokia-shares-dive-profit-warning

Butcher, M. (2010). Nokia’s new CEO has a mobile mountain to climb. Tech Crunch. Retrieved on July 8, 2011 from http://eu.techcrunch.com/2010/09/10/nokias-new-ceo-has-a-mobile-mountain-to-climb/

Nokia. (2011). Investors resources. Nokia. Retrieved on July 8, 2011 from http://phx.corporate-ir.net/phoenix.zhtml?c=107224&p=irol-stockchart

Yahoo Finance. (2011). Nokia Corporation. Yahoo Finance. Retrieved on July 8, 2011 from http://finance.yahoo.com/q?s=NOK