Helsinki / Seattle - Two years after hitching its fate to Microsoft’s Windows Phone software, Nokia collapsed into the arms of the US giant yesterday, agreeing to sell its main handset business for e5.44 billion (R73.4bn).
Nokia, which will continue to make networking equipment and hold patents, was once the dominant handset maker but has long since been overtaken by Apple and Samsung in the highly competitive market for more powerful smartphones.
Nokia’s Canadian boss Stephen Elop, who ran Microsoft’s business software division before jumping to Nokia in 2010, will return to the US firm as head of its mobile devices business – a Trojan horse, according to disgruntled Finnish media.
He is being discussed as a possible replacement for Microsoft’s retiring chief executive Steve Ballmer, who is trying to remake the US firm into a gadget and services company like Apple before he departs, though it has fallen short so far in its attempts to compete in mobile devices.
“It’s very clear to me that rationally this is the right step going forward,” Elop said, although he added that he also felt “a great deal of sadness” over the outcome.
In three years under Elop, Nokia’s market share collapsed and its share price shrivelled.
In 2011, after writing a memo that said Nokia was falling behind and lacked the in-house technology to catch up, Elop made the controversial decision to use his former firm Microsoft’s Windows Phone for smartphones, rather than Nokia’s own software or Google’s ubiquitous Android operating system.
Nokia, which had a 40 percent share of the cellphone handset market in 2007, now has a mere 15 percent share, with an even smaller 3 percent in smartphones.
Shares in Nokia surged 39 percent to e4.10 yesterday as investors who had borrowed and sold the stock to bet on further price falls rushed to buy back to limit their losses. The stock is still only a fraction of its 2000 peak of e65.
After yesterday’s gains the whole company is worth about e15bn, a far cry from its glory days, when it peaked at over e200bn. Microsoft shares in Frankfurt were down about 2.2 percent.
The sale of the handset business is not the first dramatic turn in the 148-year history of a company that has sold everything from television sets to rubber boots, but it was taken as a hard blow in Finland.
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 tens of thousands and then delivered it into Microsoft’s hands, was a galling snub to national pride.
“[Elop’s predecessor] Jorma Ollila brought a Trojan horse to Nokia”, widely read tabloid Ilta-Sanoma declared in a column. Ollila built Nokia into a global powerhouse but was blamed for being late to recognise the threat of Apple’s iPhone and the smartphone revolution.
“As a Finnish person, I cannot like this deal. It ends one chapter in this Nokia story,” Juha Varis at Danske Capital said. “On the other hand, it was maybe the last opportunity to sell it.
“So this is the outcome: the whole business for e5bn. That’s peanuts compared to its history,” he said.
Nokia’s new interim chief executive, Risto Siilasmaa, painted a picture of just how grudgingly the call to sell had been arrived at, describing how the board had met almost 50 times after the approach by Microsoft as it explored alternatives to a sale.
Ballmer, at a news conference in the Finnish capital, sought to assuage fears the deal would hit jobs in the Nordic country and said Microsoft would build on the recent growth of Nokia’s flagship 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 would transfer in Finland. – Reuters