It is a smart move or a desperate gamble?
Struggling Nokia has agreed to sell its handset business to deep-pocketed Microsoft for 5.44 billion euros – described by one analyst as “peanuts”.
Apparently it was a reluctant sale with Nokia’s board meeting over 50 times before agreeing to the offer.
But Microsoft’s boss Steve Ballmer said he believes this will help it compete in a market it has struggled in until now:
He told reporters in Helsinki: “Today’s announcement is a bold step into the future. For Microsoft it’s also a signature event, a signature event, in our transformation. We think this is win win for employees, win win for share holders and win win for customers of both companies.”
The Finnish firm was once the world’s dominant handset maker but has long since been overtaken by Apple and Samsung in the extremely competitive market for more powerful and profitable smartphones.
Nokia, which had a 40 percent share of the handset market in 2007, now has a mere 15 percent share, with an even smaller 3.3 percent in smartphones, contrasting with Apple’s 14.2 percent and Samsung’s 31.7 percent.
Some analysts think this deal may be too little too late. Daniel Gleeson from IHS said: “You’ve got two titans of the past really clashing together. It does provide Microsoft with the ability to merge the handset and the software side of its mobile business together, which gives it a better chance of breaking through. However I think Microsoft are probably being over ambitious.”
Other disagree saying Microsoft has to succeed in the mobile world and this move help could turn it into a power player able to challenge Apple and Google, the makers of the two most popular phone operating systems.
What is certain is that the deal thrusts Microsoft deeper into the hotly contested mobile phone market, despite some investors urging it to stick to its core strengths of business software and services.
Microsoft’s shares fell while Nokia’s rose almost 34 percent on Tuesday, however much of that gain was because hedge funds were caught off-guard by the deal.
They has been betting heavily that Nokia’s stock would fall and had to scramble to buy back shares they had out on loan to try and trim their losses on those bets.