Nokia Sells Handset Business To Microsoft At A Shockingly Low Price
It cannot be said that Nokia NOK -2.5%‘s decision to sell its handset unit to Microsoft MSFT -0.45% is a surprise. But what definitely are surprises are the timing and the price. Nokia’s glory days of 110 B euro market cap are long gone – yet it’s a visceral shock to see the Devices and Services unit sold under 5.5 B euros
. It’s a particularly stunning turn as it seemed that Nokia had finally turned the corner with its Lumia smartphone business literally just months ago. The model that at last helped Nokia to find some volume traction was the Lumia 520, which debuted last spring. Boosted by its sub-$150 price, the Lumia 520 and its sibling models have recently enjoyed substantial momentum in South-East Asia and even at T-Mobile and AT&T T +0.53% in
North America. What has given the budget Lumia series a considerable boost this past summer has been the apparent hesitation of key rivals like HTC , BlackBerry and Sony in pursuing the sub-$200 smartphone category.
Why would Nokia opt to sell the handset operations just as the success of the low-end models is returning the smartphone unit to growth track? It is possible that the feature phone sales collapse has turned into such a red rout that Nokia felt it had to push the panic button right now. The Asha range of premium feature phone models had a surprisingly perky year in 2012, but suffered grievously from low-end Android vendor aggression in Africa, Latin America and Asia in the first half of 2013. It could be that the latest wave of $100-130 smartphones from Google’s Asian allies has pushed Nokia’s feature phone business into such a tail spin that immediate measures were necessary. Apple’s new value iPhone may be about to put pressure on Nokia’s high-end Lumia sales.
Nevertheless, the motivation of Stephen Elop will now come under intense scrutiny. Elop came from Microsoft and decided very quickly that Windows was the only hope for Nokia’s smartphone unit, which was still selling more than 24 M units per quarter in early 2011. After he eliminated all alternative operating system options, he has now decided to sell Nokia’s smartphone unit at a notably low price… to Microsoft, the company he will now rejoin.
You don’t need to be a Finn to take a moment to wonder whether Elop’s loyalties have been entirely undivided over the past few years.
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