Helsinki / Seattle - In an era when shiny new tech start-ups can be worth tens of billions of dollars, Microsoft’s deal to acquire Nokia’s cellular handset business for e5.44 billion (about R74bn) is a modest one from a financial point of view.
Yet the deal is likely to go down as a major turning point in the contemporary technology business, one that marks the end of the Finnish company’s unlikely run as a world-beating tech icon even as it shapes the future of Microsoft – for better or for worse.
In Finland, politicians and business leaders mourned the fall of Nokia, while pensioners wondered what it all meant for them. In Seattle, the chatter centred on what the deal might say about the race to succeed Microsoft chief executive Steve Ballmer, who announced two weeks ago that he would step down within a year.
For the telecoms industry, meanwhile, the deal signals further consolidation, coming just a day after Verizon Communications announced a $130bn (R1.3 trillion) deal to buy Vodafone’s stake in its wireless unit.
It could help Microsoft become a major rival to Apple and Samsung in the global smartphone business, though it will also put even more pressure on the company to show that its massive investments in consumer devices make sense.
The Nokia deal “unequivocally suggests they aren’t exiting the business and in fact are doubling down on mobile”, Todd Lowenstein, a fund manager at HighMark Capital Management, said.
“They can in all likelihood carve out a decent niche with their scale as a fully integrated player, however, investors are questioning the merits,” Lowenstein added. “The markets have spoken volumes.”
Microsoft shares finished down 4.6 percent on Tuesday, the day the deal was unveiled.
After Nokia switched to Windows Phone software, there was speculation that Microsoft might eventually buy it, but many analysts thought Microsoft had the best of both worlds – a committed hardware partner, but none of the downside risk of owning a handset maker. - Reuters