Nokia to sell handset biz to Microsoft for $7.2 bn

Two years after hitching its fate to Microsoft’s Windows Phone software,Nokia collapsed into the arms of the US software giant.

Written by Reuters | Helsinki,seattle | Published: September 4, 2013 1:25 am

Two years after hitching its fate to Microsoft’s Windows Phone software,Nokia collapsed into the arms of the US software giant on Tuesday,agreeing to sell its main handset business for euro 5.44 billion ($7.2 billion).

Nokia,which will continue to make networking equipment and hold patents,was once the world’s dominant handset maker but was long since 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 CEO 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 told reporters,though he added he also felt “a great deal of sadness” over the outcome. In three years under Elop,Nokia saw its market share collapse and its share price shrivel.

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 per cent share of the handset market in 2007,now has a mere 15 per cent share,with an even smaller 3 per cent in smartphones.

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 its native Finland.

The deal is expected to close in the first quarter of 2014,subject to approval by Nokia shareholders and regulators.

The india connect

* Nokia manufactures feature phones in its Chennai factory

* Lumia phones are imported

* The factory employs around 8,000 people. Globally,around 32,000 of Nokia’s 120,000-strong workforce will be moved to Microsoft

* While India-specific figures are unavailable,Nokia’s Q2 2013 earnings report showed a growth of over 30% in terms of sales of Lumia phones

27 mn total Lumia sales (global)

7.4 mn sold in Q2 2013

5.6 mn in Q1

4 mn in Q4 of 2012

Nokia’s feature phone business was booming largely due to the popularity of its Asha full-touch phones in India 53.7 mn feature phones sold in Q2 2013 (global)

* 4.3 mn Asha full-touch phones sold in Q2 2013

* 24 mn total Asha full-touch phones sold (June 6,2012 to June 30,2013)

Nokia India tax dispute unsettled

New Delhi: Nokia’s India unit was served in March 2013 with a tax demand for five years starting from 2006-07. The tax demand said that Nokia India should have withheld 10 per cent TDS for royalty payments made against the supply of software by the parent company. Nokia has consistently maintained that it was in full compliance with Indian laws as well as the bilaterally negotiated tax treaty between India and Finland. It remains to be seen what the fate of this case would be under the new dispensation. ens

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