Microsoft to buy Nokia’s mobile phone business for $7.2-billion
Stephen Elop’s attempt to reverse the fortunes of Nokia, once the world’s biggest maker of mobile phones, has ended in failure.
In a surprise announcement Tuesday morning, the company’s Canadian CEO said that Microsoft will buy Nokia’s handset business for €5.4-billion ($7.2-billion), signalling its surrender in the handset wars against Apple and Samsung. Mr. Elop will resign from Nokia and return to Microsoft, his employer until 2010.
The move reshapes Microsoft, adding consumer hardware – the Nokia handset business – to its PC software base. Nokia phones already use Microsoft’s mobile phone operating system. But it’s an open question whether Microsoft, which has never had great success in the mobile space, will emerge as a viable competitor to phone powered by Apple’s iOS and the Android systems used by Samsung and others.
“Today marks a moment of reinvention,” Microsoft CEO Steve Ballmer and Mr. Elop said jointly. “With the commitment and resources of Microsoft to take Nokia’s devices forward, we can now realize the full potential of the Windows ecosystem, providing the most compelling experiences for people at home, at work and everywhere in between.”
Mr. Ballmer recently announced he would step down from Microsoft within a year. The rehiring of Mr. Elop theoretically makes him a contender to replace Mr. Ballmer, though competition for the job, from both internal and external candidates, is bound to be intense.
The Nokia sale underscores the intense competition in the mobile phone industry. Nokia’s decision to sell comes shortly after BlackBerry (formerly Research In Motion), the company that had dominated the mobile business market, revealed that it is mulling its “strategic options.” They include privatizing the company, selling it outright or, as Nokia has just done, unloading the handset business.
The Microsoft deal will leave Nokia as a telecoms equipment maker, competing with infrastructure giants Siemens, Ericsson, Huawei and Alcatel-Lucent. That division, known as Nokia Solutions and Networks (NSN) is profitable and was, until recently, jointly owned with Siemens. Mr. Elop bought out Siemens for €1.7-billion earlier this year to gain full access to NSN’s ample cash flow. Analysts put NSN’s value at anywhere between €5-billion and €8-billion.
Nokia’s decline has been spectacular. In 2008, the year after Apple launched the iPhone, the company sold 468-million handsets In the first half of this year, the number was 123-million, giving it an annualized sales rate of less than half of the old figure. Since 2011, pretax losses have exceeded €4-billion.
Its share price got slaughtered. In late 2007, the shares peaked at euros 40, making the 148-year-old company Scandinavia’s most valuable stock market name. On Monday, they closed at just under €3. The shares, however, are up 31 per cent in the last 12 months, allowing Mr. Elop to claim that he at least stopped the shares' free fall.
Hired to save the handset business from oblivion, Mr. Elop compared Nokia to a “burning platform.” He ditched Nokia’s home-grown mobile operating system, Symbian, in 2011, and adopted Microsoft’s. He went on to eliminate more than 20,000 jobs and, in January, suspended the share dividend.
Mr. Elop pinned Nokia’s future on the new line of Microsoft-equipped Nokia phones, including one, the Lumia 1020, which came with a 41-megapixel camera aimed at users who wanted the mobile phones to double as superb cameras.
While the Lumia range met with critical success, their sales, while growing, have not been enough to make Nokia competitive with Apple and Samsung, even if Nokia was able to displace BlackBerry as the No. 3 smartphone maker.
Windows-based phones (mostly Nokias) have a mere 3.3 per cent global market share, according to the Gartner research group. Phones powered by Google’s Android system, such as the apparently unstoppable Samsung line, and Apple’s iOS share more than 93 per cent of the market.
While the sale of Nokia’s handset business was always a possibility, it came sooner than some tech analysts had expected. That’s because Nokia still had ample liquidity – it had net cash of €4.1-billion at the end of June and its brand remains strong in many parts of the world, though not in the crucial North American market.
The Nokia sale values the handset business at €3.8-billion, with another €1.65-billion for Nokia’s patents, the two companies said in a statement. About 32,000 Nokia employees will be transferred to Microsoft, but it is not known how many will remain in Finland.
Microsoft to buy Nokia
Stephen Elop’s attempt to reverse the fortunes of Nokia, once the world’s biggest maker of mobile phones, has ended in failure.
In a surprise announcement Tuesday morning, the company’s Canadian CEO said that Microsoft will buy Nokia’s handset business for €5.4-billion ($7.2-billion), signalling its surrender in the handset wars against Apple and Samsung. Mr. Elop will resign from Nokia and return to Microsoft, his employer until 2010.
The move reshapes Microsoft, adding consumer hardware – the Nokia handset business – to its PC software base. Nokia phones already use Microsoft’s mobile phone operating system. But it’s an open question whether Microsoft, which has never had great success in the mobile space, will emerge as a viable competitor to phone powered by Apple’s iOS and the Android systems used by Samsung and others.
“Today marks a moment of reinvention,” Microsoft CEO Steve Ballmer and Mr. Elop said jointly. “With the commitment and resources of Microsoft to take Nokia’s devices forward, we can now realize the full potential of the Windows ecosystem, providing the most compelling experiences for people at home, at work and everywhere in between.”
Mr. Ballmer recently announced he would step down from Microsoft within a year. The rehiring of Mr. Elop theoretically makes him a contender to replace Mr. Ballmer, though competition for the job, from both internal and external candidates, is bound to be intense.
The Nokia sale underscores the intense competition in the mobile phone industry. Nokia’s decision to sell comes shortly after BlackBerry (formerly Research In Motion), the company that had dominated the mobile business market, revealed that it is mulling its “strategic options.” They include privatizing the company, selling it outright or, as Nokia has just done, unloading the handset business.
The Microsoft deal will leave Nokia as a telecoms equipment maker, competing with infrastructure giants Siemens, Ericsson, Huawei and Alcatel-Lucent. That division, known as Nokia Solutions and Networks (NSN) is profitable and was, until recently, jointly owned with Siemens. Mr. Elop bought out Siemens for €1.7-billion earlier this year to gain full access to NSN’s ample cash flow. Analysts put NSN’s value at anywhere between €5-billion and €8-billion.
Nokia’s decline has been spectacular. In 2008, the year after Apple launched the iPhone, the company sold 468-million handsets In the first half of this year, the number was 123-million, giving it an annualized sales rate of less than half of the old figure. Since 2011, pretax losses have exceeded €4-billion.
Its share price got slaughtered. In late 2007, the shares peaked at euros 40, making the 148-year-old company Scandinavia’s most valuable stock market name. On Monday, they closed at just under €3. The shares, however, are up 31 per cent in the last 12 months, allowing Mr. Elop to claim that he at least stopped the shares' free fall.
Hired to save the handset business from oblivion, Mr. Elop compared Nokia to a “burning platform.” He ditched Nokia’s home-grown mobile operating system, Symbian, in 2011, and adopted Microsoft’s. He went on to eliminate more than 20,000 jobs and, in January, suspended the share dividend.
Mr. Elop pinned Nokia’s future on the new line of Microsoft-equipped Nokia phones, including one, the Lumia 1020, which came with a 41-megapixel camera aimed at users who wanted the mobile phones to double as superb cameras.
While the Lumia range met with critical success, their sales, while growing, have not been enough to make Nokia competitive with Apple and Samsung, even if Nokia was able to displace BlackBerry as the No. 3 smartphone maker.
Windows-based phones (mostly Nokias) have a mere 3.3 per cent global market share, according to the Gartner research group. Phones powered by Google’s Android system, such as the apparently unstoppable Samsung line, and Apple’s iOS share more than 93 per cent of the market.
While the sale of Nokia’s handset business was always a possibility, it came sooner than some tech analysts had expected. That’s because Nokia still had ample liquidity – it had net cash of €4.1-billion at the end of June and its brand remains strong in many parts of the world, though not in the crucial North American market.
The Nokia sale values the handset business at €3.8-billion, with another €1.65-billion for Nokia’s patents, the two companies said in a statement. About 32,000 Nokia employees will be transferred to Microsoft, but it is not known how many will remain in Finland.
Microsoft to buy Nokia
