real-time news and commentary for investors
Tuesday, Sep 3
More on Microsoft/Nokia
- Nokia (NOK) had a market cap of $14.5B as of Friday's close. Thus, unless investors think Nokia's assets outside of Devices & Services (they include $3B+ in net cash and an IP portfolio that's now more valuable) are worth $7.3B or less, shares will trade higher on Tuesday.
- Investors are likely to now look much more favorably on Nokia's financial health, both due to the Microsoft (MSFT) cash infusion and the fact the company is shedding a business it has been struggling to turn a profit on (and which also has significant liabilities). Look for some of the ratings agencies who have downgraded Nokia in recent years to issue upgrades going forward.
- Microsoft is both making good on its promise to evolve into a "devices & services" company, and taking an enormous gamble on increasing its consumer exposure at a time when enterprise-related sales have come to account for the lion's share of its op. profit.
- Nokia's Devices & Services unit posted a €703M op. loss (non-IFRS) in 2012, and a €32M op. loss in Q2. And while its Lumia sales rose to $1.16B in Q2 on the back of 7.4M units, feature phone sales fell 39% Y/Y to $1.41B thanks to soaring demand for cheap Android phones. Will Microsoft attempt to unload Nokia's feature phone ops, and if so, what kind of deal will it get?
- Also of concern: 1) Windows Phone, though faring well in some markets, only had a 3.7% smartphone unit share in Q2 (per IDC), and a large portion of its growth appears to be coming from feature phone converts. 2) WP licensees such as Samsung, LG, and Huawei, whose support for the OS has been limited relative to their support for Android, may not be thrilled that their WP models will be directly competing against Microsoft. As it is, the Lumia line accounts for an overwhelming share of the WP8 installed base.
- It's the end of an era: Nokia towered over the mobile phone industry for years, and had a 37% unit share in Q2 2007 (just before the iPhone's arrival).
- In what might amount to a goodwill gesture, Microsoft says it will invest $250M+ to build a Finnish data center that will serve European Microsoft consumers.
- Nokia CC at 4AM ET. Microsoft CC at 8:45AM ET.
- Previous: Microsoft buying Nokia's Devices & Services unit