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Nokia to sell phone unit to Microsoft for $7.2 billion

By Agence France-Presse
Tuesday, September 3, 2013 4:00 EDT
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Samsung and Apple have captured more than half the global market for smartphones and over 90 percent of its profits, a research firm said Friday. ABI Research said global smartphone shipments grew 41 percent year-over-year to 144.6 million in the first quarter of 2012. Samsung and Apple accounted for 55 percent of smartphone shipments and more than 90 percent of the market's profits, the report said. ABI said Samsung delivered 43 million units in the quarter, to 35 million for Apple. Nokia was third with 11.9 million and BlackBerry maker Research in Motion just behind with 11.1 million. Of the top 10 smartphone makers, only Samsung and Sony saw sequential growth from the fourth quarter, which is traditionally strong, the report said. "Nokia witnessed a 40 percent sequential decline in shipments and may soon be passed by ailing RIM in shipments despite the BlackBerry maker's 20 percent sequential drop. Nokia recently began working with Microsoft on a Windows-based smartphone, dropping its own powered by Symbian. "At this point in the year, Nokia will have to grow its Windows Phone business 5,000 percent in 2012 just to offset its declines in Symbian shipments," says Michael Morgan, an ABI analyst. The report said major markets like North America and Western Europe are nearing or passing the mark of 50 percent penetration for smartphones, meaning much of the growth will come from emerging markets like China, "which continues to show strong shipment growth of over 80," ABI said. A report last month by Gartner said 419.1 million mobile phones were bought worldwide during the quarter in a two percent decline from the same period a year earlier. It was the first quarterly decline since early in 2009.
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Beleaguered Finnish company Nokia announced on Tuesday the sale of its mobile phone unit to Microsoft for 5.44 billion euros ($7.17 billion), bringing to an end its days as a phone maker.

Nokia will grant the US software giant a 10-year non-exclusive licence to its patents and will itself focus on network infrastructure and services, which it called “the best path forward for Nokia and its shareholders.”

The company also announced the immediate departure of chief executive Stephen Elop, who was hired from Microsoft in 2010 to turn the company around.

He will be replaced in the interim by Risto Siilasmaa, Nokia’s chairman of the board.

Nokia dominated the mobile phone market for 14 years, until it was overtaken by Samsung in 2012 as the top-selling brand, as it struggled to establish winning business models and mobile devices.

Rumours of a Nokia sale have swirled in recent months.

Amid increasing competition from Apple and Samsung, Nokia dramatically changed its strategy in February 2011 when Elop warned the company was “standing on a burning platform” and needed to shift course immediately.

The shake-up involved phasing out Nokia’s Symbian platform in favour of a partnership with Microsoft, introducing handsets powered by Windows Phone software.

Nokia bet its future on its new Lumia smartphones, aiming to rival Apple’s iPhone and Samsung’s Galaxy.

But Tuesday’s announcement marks the end of Nokia’s days as an independent phone manufacturer.

Some 32,000 Nokia employees are expected to transfer to Microsoft once the deal is concluded, including approximately 4,700 people in Finland, the company said.

The operations affected by the transfer generated approximately 14.9 billion euros in 2012, or almost 50 percent of Nokia’s net sales, it added.

Of the total purchase price of 5.44 billion euros, 3.79 billion relates to the purchase of Nokia’s devices and services business, and 1.65 billion relates to the mutual patent agreement and future options.

Nokia will book a gain on the sale of some 3.2 billion euros, which would “clearly strengthen our financial position and it will provide a solid basis for future investment in Nokia’s continuing businesses,” Siilasmaa said.

Last month, Nokia finalised the purchase of German engineering giant Siemens’ 50-percent stake in Nokia Siemens Networks (NSN) for 1.7 billion euros.

NSN, which is specialised in high-speed mobile broadband, was set up as a joint venture between the two companies in 2007, a partnership that expired in April. The unit has posted stronger earnings than Nokia’s mobile phone business.

NSN posted a net profit of 8.0 million euros in the second quarter of this year, compared to Nokia’s net loss of 227 million euros in the same period.

The sale to Microsoft is expected to be completed in the first quarter of 2014, pending approval by Nokia shareholders and regulatory authorities, Nokia said.

Microsoft chief executive Steve Ballmer meanwhile told reporters in a conference call that Windows Phone was “the fastest growing smart platform today, growing by 78 percent last year.”

“Today’s agreement will accelerate our success in smartphones,” he added.

Agence France-Presse
Agence France-Presse
AFP journalists cover wars, conflicts, politics, science, health, the environment, technology, fashion, entertainment, the offbeat, sports and a whole lot more in text, photographs, video, graphics and online.
 
 
 
 
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