Ericsson (ERIC) fell from around $13 to the $8 range after the Department of Justice said its disclosures about Iraq were insufficient. Its alleged payments to ISIS spells trouble for the firm. Nokia’s (NOK) stock fell in sympathy.
Ericsson allegedly paid ISIS tens of millions of dollars for nearly a decade. In return, it could do business in Iraq. The accusation will cast a dark cloud on the company’s reputation. Although the sellers could have sent the stock to a low, downside risks remain. The DOJ may prove Ericsson’s guilt.
In the 5G hardware space, only Nokia, Ericsson, and Samsung are the non-Chinese players left. Investors may want to avoid ERIC stock for now. Samsung and Nokia have strong prospects ahead. Nokia is especially compelling after the stock fell sharply in the last week for no reason.
On March 4, Nokia signed a deal with Indosat Ooredoo Hutchison to deploy and expand its 4G and 5G network access across Indonesia over three years. Though Nokia has many contracts lined up, it needs to reinstate its dividend. If it wins back income investors, the stock would rise like Ford (F) did after resuming dividends. Furthermore, the dividend policy would signal strong cash flow growth. This removes uncertainty and increases confidence in Nokia’s strong prospects.