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

Wembley Stadium
footballNews follows deal with Germany
Arts and Entertainment
A spell in the sun: Emma Stone and Colin Firth star in ‘Magic in the Moonlight’
filmReview: Magic In The Moonlight
voicesApple continually kill off smaller app developers, and that's no good for anyone
A 'Sir Alex Feguson' tattoo

Arts and Entertainment
Ben Whishaw is replacing Colin Firth as the voice of Paddington Bear

Thriller is set in the secret world of British espionage

ebooksAn unforgettable anthology of contemporary reportage
Life and Style

ScienceGallery: Otherwise known as 'the best damn photos of space you'll see till 2015'
Life and Style

Bomber jacket worn by Mary Berry sells out within an hour

Life and Style
Andros Townsend is challenged by Vladimir Volkov
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Audit Manager Central Functions

To £85,000 + banking benefits: Saxton Leigh: You will be expected to carry out...

Credit Risk Audit Manager

Up to £90,000 + benefits: Saxton Leigh: Credit Risk Audit Manager required to ...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week