Charles Goulding of R&D Tax Savers takes a look at Nokia’s business and potential in 3D printing.
Nokia has been in the news recently not only because they have a new CEO, but also because they need to become more competitive.
The global market for 5G capital equipment suppliers is essentially limited to Huawei of China, Ericsson of Sweden and Nokia of Finland.
Recently there has been some speculation that Nokia might do some type of business combination with Ericsson.
Due to the sheer size of the U.S. 5G market, equipment and product needs, as well as the U.S. prohibition on doing business with Huawei, Nokia should have clear sailing sales growth for what is essentially a duopoly with Ericsson. Despite these market conditions and advantages to date, Nokia has not been able to capitalize on the opportunity.
In recent years, Nokia has amassed a treasure trove of telecom business assets related to the $16 billion dollar acquisition of Alcatel- Lucent and the Siemens telecom segment. However, there exists an underlying cultural issue at Nokia; for an extended period, Nokia has been unable to capture and leverage the technologies right at its fingertips.
A former CEO who came in from Microsoft when Nokia lost its then dominant position in cell phones put it this way:
“Part of that change is not just what we do with products or organization, but it’s very much about shifting our mindset to a challenger mindset, to reflect on the fact that we have significant competition, we have to fight hard, we have to show intellectual curiosity, make sure we understand the competition….We have to go faster, and harder, and more aggressively now than we’ve ever gone before because of the competition.”
This author’s view is that Nokia can use 3D printing to help meld its diversified equipment configuration library into technologically advanced equipment and components.
R&D tax credits are available to help Nokia leapfrog.
The Research & Development Tax Credit
Enacted in 1981, the now permanent Federal Research and Development (R&D) Tax Credit allows a credit that typically ranges from 4%-7% of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:
Must be technological in nature
Must be a component of the taxpayer’s business
Must represent R&D in the experimental sense and generally includes all such costs related to the development or improvement of a product or process
Must eliminate uncertainty through a process of experimentation that considers one or more alternatives
Eligible costs include US employee wages, cost of supplies consumed in the R&D process, cost of pre-production testing, US contract research expenses, and certain costs associated with developing a patent.
On December 18, 2015, President Obama signed the PATH Act, making the R&D Tax Credit permanent. Beginning in 2016, the R&D credit can be used to offset Alternative Minimum tax for companies with revenue below $50MM and, startup businesses can obtain up to $250,000 per year in payroll tax cash rebates.
It’s a daunting challenge to integrate separate groups of large equipment lines and engineering staffs, and Nokia has been criticized for not integrating the acquired businesses quick enough. Someone has to take the master designer role, and 3D printing can be the crucible to anneal a best of breed telecom equipment powerhouse. Presumably the new CEO has the mandate and runway to accomplish this.