Microsoft Corp (MSFT.O) will buy Nokia's (NOK1V.HE) phone business and license its patents for 5.44 billion euros, a bold foray into mobile devices that also brings potential chief executive contender Stephen Elop back into the fold.
Two years after hitching its fate to Microsoft's Windows Phone software, the Finnish phone maker that once dominated the global market collapsed into the arms of the U.S. software giant, its mobile business ravaged by nimbler rivals Apple Inc. (AAPL.O) and Samsung Electronics (005930.KS).
Shares in Microsoft slid as much as 6 percent in the afternoon, lopping more than $15 billion off the company's market value, as investors protested the acquisition of an underperforming and marginalized corporation that lost more than $4 billion in 2012.
Retiring CEO Steve Ballmer is trying to remake Microsoft into a gadget and services company like Apple, a move that has not won the endorsement of all shareholders.
Nokia CEO Elop, who ran Microsoft's business software division before jumping ship in 2010, will return to the U.S. firm to head up its mobile devices business just as the company's board considers a successor to Ballmer, who announced last week he will retire within a year.
Elop, who presided over Nokia's market share collapse and a shrivelling share price during his three years at the helm, is being discussed as a potential replacement because he remains respected and is considered one of the few who can fully grasp Microsoft's sprawling empire.
But disgruntled Finnish media labelled him a Trojan horse who handed over the keys to one of the few remaining European technology powers. Nokia, whose market value topped $200 billion over a decade ago, will now concentrate on its networking equipment unit, navigation business and technology patents.
The Nokia deal thrusts Microsoft deeper into the hotly contested mobile phone market, despite some investors urging it to stick to its core strengths of business software and services. Activist fund manager ValueAct. Capital Management, which has been offered a board seat, is among those concerned with Ballmer's leadership and his attempts to plough headlong into the lower-margin, highly competitive mobile devices arena.
"Adding to the cost structure when shareholders may be looking for steps in the other direction is not likely to be well received...," said Nomura analyst Rick Sherlund. "Perhaps a decision to repurchase stock and up the dividend would be a good idea right about now."
Others applauded Ballmer's aggressive gambit.
"Microsoft cannot walk away from smartphones, and the hope that other vendors will support Windows Phone is fading fast. So buying Nokia comes at the right time," said Carolina Milanesi, an analyst at Gartner.
"In today's market it is clear that a vertical integration is the way forward for a company to succeed. How else could Microsoft achieve this?"
As part of Microsoft, Elop will head an expanded Devices unit. Julie Larson-Green, who in July was promoted to head a new Devices and Studios business in Ballmer's reorganisation, will report to Elop when the deal is closed
Yesterday Microsoft says:”
We announced some exciting news today: We have entered into an agreement to purchase Nokia’s Devices & Services business, which includes their smartphone and mobile phone businesses, their award-winning design team, manufacturing and assembly facilities around the world, and teams devoted to operations, sales, marketing and support.
For Microsoft, this is a bold step into the future and the next big phase of the transformation we announced on July 11.
We are very excited about the proposal to bring the best mobile device efforts of Microsoft and Nokia together. Our Windows Phone partnership over the past two and half years has yielded incredible work - the stunning Lumia 1020 is a great example. Our partnership has also yielded incredible growth. In fact, Nokia Windows Phones are the fastest-growing phones in the smartphone market.
Now is the time to build on this momentum and accelerate our share and profits in phones. Clearly, greater success with phones will strengthen the overall opportunity for us and our partners to deliver on our strategy to create a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value most.
We have laid out Microsoft’s strategic rationale for this transaction in a presentation that I encourage you to read.
This is a smart acquisition for Microsoft, and a good deal for both companies. We are receiving incredible talent, technology and IP. We’ve all seen the amazing work that Nokia and Microsoft have done together.
Given our long partnership with Nokia and the many key Nokia leaders that are joining Microsoft, we expect a smooth transition and great execution.
As is always the case with an acquisition, the first priority is to keep driving through close, which we expect in the first quarter of 2014, following approval by Nokia’s shareholders, regulatory approvals, and other closing conditions. “
TO KNOW MORE PLEASE VISIT:
- http://www.microsoft.com/en-us/news/Press/2013/Sep13/09-02email.aspx
- http://www.microsoft.com/en-us/news/press/2013/sep13/09-02AnnouncementPR.aspx
- http://in.reuters.com/article/2013/09/03/microsoft-nokia-idINDEE98202R20130903
- http://gadgets.ndtv.com/mobiles/news/in-nokia-microsoft-bets-on-apple-like-revival-414136
