Rumours Moot Microsoft-Nokia Buyout

The rumour mill has been churning steadily over reports that Microsoft will purchase Nokia’s mobile phone business for around $19 billion (£11.6bn).

That comes despite a Nokia spokesperson telling Reuters that “these rumours are 100 percent baseless.”

Pessimism

Russian blogger Eldar Murtazin, known for his digging into Nokia’s affairs, tweeted on 31 May: “One small software company decided last week that they could spent $19bn to buy a part of small phone vendor. That’s it.”

That was also enough to pull the lever starting up the rumour mill. A tumbling Nokia stock price and analysts’ pessimistic comments about the company’s prospects both added some fuel. But Microsoft already has its sweetheart deal in place: an agreement to port Windows Phone software onto Nokia’s smartphones, in exchange for roughly $1bn over five years. What more could Microsoft stand to gain by paying $19bn?

Certainly, the transition from Nokia’s homegrown mobile operating system, Symbian, to Windows Phone is becoming a major speed bump for both companies.

“We would continue to avoid the stock as Symbian smartphone sales are falling off faster than expected and we are sceptical that new Windows Phone (WP) models will be able to replace lost profits,” Stephen Patel, an analyst with Gleacher & Company, wrote in a 31 May research note. “Our checks suggest mixed carrier support for Nokia’s transition to WP.”

Moreover, he voiced worries about Windows Phone’s ability to substitute Symbian’s marketplace role with little attrition: “We remain concerned that WP industry sales remain below 2mil units/quarter and that [Nokia’s] scale will not be enough to offset a faster-than-expected drop-off in Symbian phone sales.”

Win for Apple

Other analysts see the Microsoft-Nokia deal as an outright win for Apple and its iOS ecosystem – particularly if Microsoft purchases all or part of its new partner for the aforementioned $19bn.

“We believe Nokia is a great source of market share opportunity for Apple,” Brian White, an analyst with Ticonderoga Securities, wrote in a 1 June research note. “Microsoft’s myopic approach outside the PC market is likely to provide more of a drag for Nokia mobile phone business and uncertainty for customers, allowing Apple’s iPhone to gain even further market share in the coming quarters, in our view.”

According to market research firm comScore, Windows Phone’s share of smartphones continues to dip. The first Nokia devices loaded with the operating system will likely arrive in the fourth quarter of the year.