The stories of hacking, espionage and similar activities attributed to nation states are at alarming status. We have headlines describing malware deployed at extents never before witnessed and then subsequent articles clarifying that a separate but subsequent attack is worse. Cybersecurity is among the most important matters at the outset of the 2020s, but it may be underappreciated. 

Still, it should be obvious that calls for use of only trusted vendors for the rollout of 5G network infrastructure are becoming harder to refute. As such, key enterprises involved in next generation communication technologies may be viewed as strategic assets.

The position here has been, and continues to be, that Sweden’s Ericsson (ERIC) is a preferred corporation for the rollout. China’s Huawei, previously impeded by political and diplomatic issues that include fear of espionage or eavesdropping, probably will find it even harder to compete pursuant to an attack on Microsoft Exchange servers that is attributed to a group dubbed Hafnium, maliciousness that is identified with the government of the People’s Republic. Newsflow pertaining to Finland’s Nokia (NOK), including the loss of key Verizon business and an incident layoff of thousands of workers, has been disappointing. Samsung also offers 5G infrastructure, but is such a big company that it is unlikely to make much of a difference to investors.

Both Ericsson and Nokia are actively involved in China, which is important to them. Any Chinese action against Ericsson, and there have been threats against Swedish businesses in China, could be particularly damaging. Still, world trade is highly important to China, and its message is persistently that it is beneficial to others and the appropriate path for all to pursue, or that ‘economic issues should not be politicized.’

Pertaining to 5G providers, the technology research firm Gartner has a summary of competing companies that are organized into a “Magic Quadrant.” Though Ericsson is in fact identified as the leader, and a recent award by the World Economic Forum is consistent with that, Nokia is shown to be reasonably well positioned; as in relation to Samsung.

There have been several other indications that Nokia’s technology is competitive, including a renewed partnership in international locations. Additionally, it is partnering with Microsoft, Google, and Amazon.com in order to support their cloud computing with radio assess networks. Nokia appears to have a viable future. It has a new five year deal with AT&T.

However, ongoing restructuring, which current management attributes to a predecessor, should be costly. When the company announces its quarterly results on April 29th, there may be a substantial effect. Further, costs are forecast to persist through 2023. It does not seem likely that the stock market is going to pay a premium for problems attributed to prior, ham-fisted leadership.

Still, 5G networks appear to be a strategic asset and Nokia’s technology is shown to be valued by several important parties. 

Though the risk can easily outweigh any reward when trading stock options, I am willing to sell my stock if it goes above $4.50 anytime soon. Through a buy/write trade, in which 100 shares were purchased for $4.17 each and sale of a $4.50 call option that expires on April 9th–after Good Friday, which is a stock market holiday–the trade could be executed at a cost of $400. If the stock closes above $450 on Friday, the 9th, it will be called away from my account at a gross profit of close to $50 on $400 risked. 

Options decay in value rapidly during their last 3 weeks before expiry; however, they still can be expensive if a key event is scheduled. If NOK closes beneath $4.50 per share on April 9th, another call, preferably expiring before the week of the 29th, can be sold. Any sale of a third call option, that would include the earnings event or perhaps the following week that ends May 2, should sell for a higher price at a time closest to Nokia’s earnings announcement.

Shares of NOK have declined today, concurrent with a meeting between the United States and China in Alaska that is coinciding with European condemnation of China’s human rights issues. It is not clear how much lower the stock might go. It is testing its previous close of $3.82 on March 4th. If that holds, it could bounce right back up. There is no guarantee though.

Secure 5G networks are highly important. Cybersecurity issues reinforce the situation. There is ongoing difficulty for Nokia, a competitive European firm that is involved in its infrastructure. China could act adversely to Ericsson–while proclaiming that free trade, of its own products, is the correct course of action for the world to pursue?

***the author owns stock in NOK, ERIC***

***the author may sell short MSFT***

4/5/21 on Thursday an order filled to close the $4.50 call for $1. It may not be easy to sell an April 29th $4.50 for another $17, unless the share price continues higher this week. 

4/19/21 call options are selling at lower prices, & I sold my stock for $4.20.

5/13/21 There are further stories implying difficulty in China for Ericsson. The stock may languish.