Nokia to sell handset business to Microsoft for $7.2bn

Two years after hitching its fate to
Microsoft’s Windows Phone software, Nokia
collapsed into the arms of the U.S. software
giant, agreeing to sell its main handset
business for 5.44 billion euros ($7.2 billion).
Nokia, which will continue as a maker of
networking equipment and holder of
patents, was once the world’s dominant
handset manufacturer, but was long since
overtaken by Apple and Samsung .
Nokia’s Canadian boss Stephen Elop, who
ran Microsoft’s business software division
before jumping to Nokia in 2010, will now
return to the U.S. firm as head of its mobile
devices business.
He is being discussed as a possible
replacement for Microsoft’s retiring CEO
Steve Ballmer, who is trying to remake the
U.S. firm into a gadget and services company
like Apple before he departs.
In three years under Elop, Nokia saw its
market share collapse and its share price
shrivel as investors bet heavily that his
strategy would fail.
In 2011, after writing a memo that said
Nokia was falling behind and lacked the in-
house technology to catch up, Elop made the
controversial decision to use his former firm
Microsoft’s Windows Phone for
smartphones, rather than Nokia’s own
software or Google’s ubiquitous Android
operating system.
Nokia, which had a 40 per cent share of the
handset market in 2007, now has a mere 15
per cent market share, with an even smaller
three per cent share in smartphones.
The sale of the handset business is not the
first dramatic turn in the 148-year history of
a company which has sold everything from
television sets to rubber boots.
But it was felt as a hard blow in its native
Finland, even among hard-nosed investors
who saw the sale as a final chance to
salvage value.
“I have mixed feelings, because I’m a Finn.
“As a Finnish person, I cannot like this deal.
It ends one chapter in this Nokia story,” said
Juha Varis, Danske Capital’s senior portfolio
manager whose fund owns Nokia shares.
”On the other hand, it was maybe the last
opportunity to sell it.”
Varis was one of many investors critical of
Elop’s decision to bet Nokia’s future in
smartphones on Microsoft’s Windows
phone software, which was praised by tech
reviewers, but never caught on with
consumers.
“So this is the outcome: the whole business
for five billion euros. That’s peanuts
compared to its history,” he said.
Finns lamented the decline of their former
champion.
Alexander Stubb, Finland’s minister for
European Affairs and Foreign Trade, said on
his Twitter account: “For a lot of us Finns,
including myself, Nokia phones are part of
what we grew up with. Many first reactions
to the deal will be emotional.”
It is also a pivotal moment for Microsoft,
which still has huge revenues from its
Windows computer operating system, Office
suite of business software and the X-Box
game console, but never managed to set up
a profitable mobile device business.
Microsoft’s own mobile gadget, the Surface
tablet, has sold tepidly since it was launched
last year.
“It’s a bold step into the future — a win-win
for employees, shareholders and consumers
of both companies,” Ballmer said in a
statement.
”Bringing these great teams together will
accelerate Microsoft’s share and profits in
phones and strengthen the overall
opportunities for both Microsoft and our
partners across our entire family of devices
and services.”
The move leaves the Finnish company with
Nokia Solutions and Networks, which
competes with the likes of Ericson and
Huawei in telecoms equipment, as well as a
navigation business and a broad portfolio of
patents.