Nokia surges on €5.4bn handset Microsoft deal

Shares in Nokia surged yesterday as news that Microsoft has bought the struggling mobile phone firm buoyed the stock.

The €5.4 billion deal covers Nokia’s handset business, leaving the company free to concentrate on networking equipment, its navigation business and technology patents.

The deal includes an agreement to license Nokia’s patent portfolio for 10 years. Without it, Nokia’s devices and services business would have been worth about €3.7 billion, the companies said.

Once the dominant mobile handset maker, Nokia has failed to close the gap opened up by Apple and Samsung in the competitive smartphones market.

Nokia chief executive Stephen Elop said he felt "a great deal of sadness" over the outcome. "It's very clear to me that rationally this is the right step . . . we are changing Nokia and what it stands for."

Mr Elop, who ran Microsoft’s business software division before moving to Nokia in 2010, will return to the US firm as head of its mobile devices business. He was facing accusations of being a Trojan horse from Finnish media disgruntled at the run the former jewel in the country’s crown had taken.

Nokia’s market share has collapsed and its share price has fallen significantly in the past three yeas, prompting a revolt from some shareholders concerned at the turn the company had taken.

One of Mr Elop’s early decisions was to ditch Nokia’s Symbian operating system as its main smartphone platform, opting instead to adopt Windows Phone.

Nokia, which had 40 percent of the handset market in 2007, now has 15 per cent and 3 per cent in smartphones.

While some investors have credited Mr Elop for bringing urgency to Nokia, which has accelerated its pace of product development in recent months and is due to announce a "phablet" large-screen handset this month, his legacy will be a bitter one for Finland. The company, which began life as a paper mill and has sold an eclectic range from television sets to rubber boots in its 148-year history, was a national champion in its heyday, accounting for 16 per cent of all exports.

Hired by former chairman Jorma Ollila, Mr Elop was the first foreigner to lead it.

For many Finns, the fact that a former Microsoft executive had come to Nokia, bet the firm’s future on an alliance with Microsoft, laid off 40,000 worldwide and then delivered it into Microsoft’s hands, was snub to national pride.

"Jorma Ollila brought a Trojan horse to Nokia," said a column in tabloid Ilta-Sanoma.

The Nokia story
"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."

Alexander Stubb, Finland’s minister for foreign trade, tweeted: “Nokia phones are part of what we grew up with. Many first reactions to the deal will be emotional.”

Nokia’s new interim chief executive Risto Siilasmaa said the board had met almost 50 times after the approach by Microsoft around February.

Microsoft chief Steve Ballmer sought to assuage fears the deal would hit jobs in Finland and said Microsoft would build on recent growth of Nokia's Lumia smartphones.

Nokia said it expected around 32,000 people of its roughly 90,000 worldwide staff would transfer to Microsoft, including about 4,700 who will transfer in Finland.

Assistant professor of strategy at the Warwick Business School Ronald Klingebiel said it remained to be seen if Microsoft could use its strength in desktop operating systems and software to move its customers to the mobile cloud – (Additional reporting: Reuters)