Microsoft shares tumble after €5.4bn Nokia takeover

US software giant buys Finnish group's mobile business as it attempts to catch up with Apple and Samsung

New York

Microsoft has agreed to buy Nokia's struggling handset division for €5.44bn (£4.6bn), a risky roll of the dice by the American software giant as it plays catch-up in the market for mobile devices that is dominated by arch rivals Apple and Samsung.

Along with the Finnish business, the US-based company will also re-acquire the services of Nokia's chief executive Stephen Elop, a former Microsoft employee who, since taking over Nokia in 2010, has struggled to revive the mobile-phone firm's fortunes. Among his key moves was forging a deal with Microsoft in 2011, under which Nokia adopted the American company's software as its primary platform, a strategy that did little to dent the advance of Apple, Samsung or Google and its Android mobile operating system.

Shares in Nokia, which still has a successful telecom networks and equipment business, surged by 34 per cent on news of the deal. But in a sign of the nervousness on Wall Street about Microsoft's ability to first, turn around the business, and second, use it to catch up in the mobile market, the software company's shares fell by as much as 6 per cent in the afternoon, wiping $15bn off its market value. The stock eventually closed down around 4.5 per cent.

The deal will see Microsoft pay €3.79bn for the business and €1.65bn to license Nokia's valuable patents for 10 years. Around 32,000 Nokia employees will join Microsoft.

The decision by the Finnish firm, once the market leader in mobile phones, to sell illustrates the dramatically changing fortunes of an industry now dominated by Samsung and Apple.

Nokia had just under 40 per cent of the worldwide market share in mobile phone sales as recently as 2008. That has now slumped to just 14 per cent, according to the research firm Gartner. Sales of smartphones have been worse, as Nokia has a derisory 3.1 per cent of the market, meaning it has sunk to ninth in the world.

Lee Simpson, a telecoms analyst at Jefferies, said Nokia's recent troubled history meant Microsoft was "the only possible buyer of this division, although it never appeared clear to us that this was a deal that had to happen".

Sales of the Microsoft Surface tablet, a belated rival to the iPad, have been weak and the Windows system has only 3 per cent market share in phones, compared with Google's Android with 79 per cent and Apple's iOS with 14 per cent.

But in one sign of optimism, Windows' market share overtook another troubled mobile rival, BlackBerry, earlier this year – something that was helped in part by Nokia using Windows on its phones. Moreover, despite Nokia's woes, it still remains a major presence in more basic, so-called "feature" phones – particularly in emerging markets such as Africa.

Emotions mixed in Finland as an era ends

Nokia was named after Nokianvirta, the Finnish river, where the business first began as a paper mill in the 1800s. And while it might have evolved since – switching from making paper to rubber boots and car tyres, generating electricity and even making TVs – it has always remained intertwined with its home nation.

Nokia once accounted for almost a quarter of the country's corporate tax revenues, and employed 24,600 people. So yesterday's Microsoft deal sparked a national debate.

"For a lot of us Finns including myself, Nokia phones are part of what we grew up with," Alex Stubb, Finland's EU and trade minister, said on Twitter. "Many first reactions to the deal will be emotional."

Columnists had condemned the fact that a former Microsoft boss had taken the reins at Nokia, axed tens of thousands of staff, and then delivered it into Microsoft's hands.

"I have mixed feelings, because I'm a Finn," said Juha Varis of fund manager Danske Capital, an investor in Nokia. "As a Finnish person, I cannot like this deal. The whole business for €5bn – that's peanuts compared to its history. On the other hand, it was maybe the last opportunity to sell it. "

Ilkka Paananen, of gaming firm Supercell, tweeted: "Finland needed this. Now let's all wake up and get to work."

Lucy Tobin

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test
Tour de France 2015: Twins Simon and Adam Yates have a mountain to climb during Tour of duty

Twins have a mountain to climb during Tour of duty

Yates brothers will target the steepest sections in bid to win a stage in France
John Palmer: 'Goldfinger' of British crime was murdered, say police

Murder of the Brink’s-MAT mastermind

'Goldfinger' of British crime's life ended in a blaze of bullets, say police
Forget little green men - aliens will look like humans, says Cambridge University evolution expert

Forget little green men

Leading evolutionary biologist says aliens will look like humans
The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

The Real Stories of Migrant Britain

An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

Dying dream of Doctor Death

Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy