Nokia Denies Reports of a Microsoft Acquisition for $19B
When Nokia announced a few months ago that it was dropping its Symbian mobile operating system in favor of Microsoft's new Windows Phone 7, many observers described it as the phone company throwing a lifeline to the software giant. Now Nokia is denying reports that Microsoft will buy the company for $19 billion.
The rumor apparently started when Eldar Murtazin, a Russian journalist who is editor of Mobile-Review.com, tweeted on Tuesday that "one small software company decided last week that they could spend 19 bln USD to buy a small phone vendor." He also mentioned the possibility in his blog several weeks ago, noting that the agreement could be reached before the end of this year. Nokia has described the rumor as "100 percent baseless."
Falling Sales
Murtazin was the source of the first report in February about Nokia's partnership with Microsoft for Phone 7, providing at least some credibility to his predictions.
Several circumstantial facts also lend credence to the idea. The current Nokia chief executive is ex-Microsofter Stephen Elop. Additionally, Nokia's stock is now at a 13-year low.
On Tuesday, the company warned that its sales and profit estimate for this quarter could be well below expectations. Shares dropped 17 percent Tuesday morning and another 10 percent Wednesday morning. The company's stock is down 38 percent since Feb. 11, when it announced the Microsoft partnership.
Nokia also said Tuesday that it is dropping a full-year outlook, which it attributed to a changing and difficult environment in China and Europe. Nearly a third of Nokia's sales and services are in Europe, and slightly more than a quarter are in China.
A cascading issue is that carriers, particularly in Europe, may be less willing to subsidize current Nokia phone sales if they see fewer people want them. And fewer people will want them if they are no longer subsidized by the carriers, as other smartphones are.
Why Would Microsoft Buy Nokia?
Some observers have suggested that Nokia and Microsoft have both frozen their mobile sales, since customers can be expected to wait for the first Nokia Windows Phone 7 model to be released months from now, rather than buy a Phone 7 model from another manufacturer, or a Symbian phone. Nokia has said the first joint device will ship in the fourth quarter, but there is widespread skepticism. A full range of products isn't expected until sometime next year.
In abandoning its Symbian platform for Phone 7, Nokia expected to stem the slow slide the platform experienced as more exciting generations of mobile devices emerged from Apple, Google's Android partners, Research In Motion, and Hewlett-Packard, among others.
If Microsoft does buy Nokia, it would come on the heels of its $8.5 billion purchase of Skype. Some analysts are suggesting there's little incentive right now for Microsoft to own Nokia, since the software giant already has a commitment from Nokia to make Phone 7 devices -- a manufacturing and marketing commitment estimated at $1 billion. Besides, that thinking goes, an ex-Microsoft executive is running Nokia.
The argument in favor of Microsoft's purchase is that, if Finland-based Nokia keeps sinking, it may have no other choice if the Redmond, Wash.-based software giant wants Nokia to survive as its partner.
