Investor Approval for Nokia Deal with Microsoft Expected

Shareholders in Finnish telecoms group Nokia are expected to approve the sale of its mobile phone business to Microsoft shortly, with the €5.44bn payment involved in the deal likely to outweigh resistance from a minority of investors upset over the sale of a national icon.

The group agreed in September to sell its devices and services business and license its patents to Microsoft after failing to recover from its late start in the smartphones market.

The sale, expected to close in the first quarter of 2014 after regulatory approvals, is set to boost Nokia’s net cash position to nearly €8bn from around €2bn in Q313 and allow it to return cash to shareholders, possibly through a special dividend.

Without the disposal of loss-making handset business, the remaining company will derive over 90% of sales from telecom equipment unit Nokia Services and Networks (NSN) and will also include a navigation software business and a patents portfolio.

Dr Christian Stadler, associate professor of strategic management at the UK’s Warwick Business School, commented: “My research of Nokia has found that it favours internal promotions and chief executive officers (CEOs) that are what I call ‘intelligently conservative’. These sort of CEOs have an in-depth knowledge of the company and listen to their employees, relying on old-fashioned industry expertise to devise their strategy. It takes longer, but Nokia has been around for more than a century and I don’t expect this culture to change.

“In keeping with it I think Nokia will use the money from selling its mobile business to concentrate on its three core areas. There are rumours about a tie-up with Alcatel-Lucent, but I can’t see it going back into mobiles and I don’t think a headline-grabbing deal is what is needed now.

“Nokia Solutions and Networks is solid and its rival Ericsson has done relatively well in this area, but I think Nokia’s two most promising businesses is its mapping services and patent portfolio. Mapping services is a hot area at the moment and looks ripe for expansion, while Nokia has 10,000 patent families and 30,000 patents in applications. It has a huge research and development [R&D] department, with centres in seven countries. It is very strong in R&D and should keep investing in developing new patents, with 1,200 of them essential for communication networks. I don’t think they will go for any big buy-outs, but maybe pursue smaller deals that would add to these two strong core areas.”

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