Microsoft in $7 Billion Deal for Nokia Cellphone Business

September 2, 2013, 11:51 p.m. ET

Microsoft in $7 Billion Deal for Nokia Cellphone Business


Microsoft Corp. MSFT -0.45% struck a $7 billion deal to acquire Nokia Corp.’sNOK1V.HE +1.30% core cellphone business, a bold move to try to catch up in a fast-growing mobile business that is now dominated by Samsung 005930.SE -0.44% andApple AAPL -0.91% . The deal comes on the heels of announcing the planned retirement of Microsoft Chief Executive Steve Ballmer. As part of the deal for the devices-and-services business, Microsoft will bring aboard several executives who could be contenders for Mr. Ballmer’s job.The companies said late Monday that Microsoft will pay €3.79 billion to buy “substantially all” of the Nokia business, which includes its smartphone operations. The Redmond, Wash., company will also pay €1.65 billion to license Nokia’s patents, the companies said, bringing the deal to €5.44 billion, or $7.18 billion.

Stephen Elop, Nokia’s CEO, and several other executives are joining Microsoft as part of the deal. Mr. Elop, a former Microsoft executive, is among the names being circulated as Mr. Ballmer’s successor. Microsoft recently announced that Mr. Ballmer will retire from his post within a year, or when the next CEO is chosen.

Nokia was already Microsoft’s closest partner in smartphones, with the Finnish company one of the biggest supporters of Microsoft’s phone software.

The deal with Nokia is an apparent acknowledgment that Microsoft needs a stronger hand to play in the mobile-phone business, where it is playing catch-up to Apple Inc. and Google Inc.GOOG -1.00% Microsoft’s lagging position in mobile is one of the most serious threats Mr. Ballmer’s successor will need to tackle. The deal also is a recognition by Nokia that it is better to sell off its smartphone business than take on rivals like Apple on its own.

“Microsoft aims to accelerate the growth of its share and profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing,” the companies said in a joint press statement. Nokia said the deal with Microsoft will improve its financial position and “provide a solid basis for future investment in its continuing businesses.”

The Wall Street Journal reported in June that Microsoft and Nokia had discussed a sale of Nokia’s mobile-phone business but the talks fell apart over the price of the transaction.

The companies said Microsoft is expected to use its stockpile of overseas cash to pay for the Nokia purchase and licensing pact. Microsoft and Nokia said the transaction is expected to close in the first three months of 2014, subject to approval by Nokia shareholders and other conditions.

Microsoft’s market share in smartphones is about 3% world-wide, according to comScore.

“For Microsoft, this is a bold step into the future,” Mr. Ballmer said in a note to employees. Mr. Ballmer has been reworking Microsoft around what he calls a “devices and services” strategy—a vision of Microsoft not only producing the software underlying many computing devices, but being more responsible for the personal-computers, smartphones and hardware gear on which people and businesses rely.

Mr. Ballmer’s strategy, however, has been hamstrung by Microsoft’s weak position in smartphones that are reshaping the technology battleground by minting new winners like Apple, Google and Samsung Electronics Co. As once dominant tech companies—including Microsoft and Nokia—have slipped behind the smartphone leaders, their future growth prospects have become clouded.

Nokia’s market share and market value have tumbled during the tenure of Mr. Elop, who took over in 2010. Last year, Nokia generated nearly half of its €30.2 billion in revenue from its mobile-phone segment.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: