Nokia Oyj share price up, finalizes sale of its mobile phone business to Microsoft Corp

Microsoft Corp. finalized the takeover of Nokia Oyjs mobile phone unit, allowing the software giant to renew its push into the mobile market and ridding Nokia, once market leader in mobile phone sales, of a steadily declining business.

The two companies announced the 5.44-billion-euro deal nearly eight months ago, although the final price may be slightly higher than the initial sum due to some purchase price adjustments relating to net working capital and cash earnings, Nokia said in its release.

The purchase of the Finnish companys unprofitable unit makes Microsoft the worlds second-largest mobile phone maker with around 14% market share, trailing only Samsung Electronics Co. However, the deal wont change much on the smartphone segment, where devices that are running Microsofts Windows Phone operating system were only 3% of the market, compared to the staggering 96% share of the ones using Apples iOS and Googles Android software.

The acquisition is Microsofts latest attempt to tap the growing smartphone market after it recently released an updated version of its Windows Phone operating system, which includes voice-search features aimed at competing with the ones of Apple and Google. The software giant also made its platform free-of-charge for mobile devices with screens smaller than 9 inches, in an attempt to gain market share and provide software developers with an incentive to work on applications for the Windows Phone OS.

Despite trailing its two largest competitors, Microsofts operating system is actually expected to become the fastest-growing platform over the next four years, with an estimated growth in market share of around 30% per year. However, this would get it to only 7% of the total market through 2018.

At the same time, Nokia Oyj will be focusing on cementing its positions in the network-equipment business, where it will compete with companies such as Huawei Technologies Co. and Ericsson. Nokia will also hold to its digital mapping platform, which is one of the mobile industrys largest portfolios of patents.

The company will release its earnings report on Tuesday when it will also announce its cash management program, its strategic direction and also name a new CEO, one of the main contenders for which is Rajeev Suri, current head of Nokias network-equipment business.

Sami Sarkamies, an analyst at Nordea Bank AB in Helsinki, said for Bloomberg: “The deal alone doesn’t immediately solve the problem for either company. Now, they have to roll up their sleeves and starting working to play catch-up.”

According to the acquisitions terms, around 30 000 employees of the company will be transferred to Redmond, Washington-based Microsoft. However, this will not be the end of Nokias phone production. Due to the companys inability to resolve a tax issue in India before the deals completion deadline, Nokia will get to keep its factory in Chennai, India, whose 8 000 employees produce millions of phones annually. Nokia announced it will continue to make phones at the factory as Microsofts contract manufacturer, while at the same time it helps its employees find new jobs outside the company.

Nokia Oyj fell by 0.47% in Helsinki on Friday to close the session at 5.26 euros per share, marking a one-year change of 106.73%. The company is valued at 19.77 billion euros. According to the Financial Times, the 34 analysts offering 12 month price targets for Nokia Oyj have a median target of 5.45 euros, with a high estimate of 8.40 euros and a low estimate of 4.00 euros. The median estimate represents a 3.22% increase from the previous close of 5.28 euros.