Nokia Corporation and Microsoft on the “Threshold” of Greatness

Nokia Corporation and Microsoft on the “Threshold” of Greatness
Come 2014 and Nokia Corporation (ADR) (NYSE:NOK)’s devices and services business will be in the Microsoft Corporation (NASDAQ:MSFT) fold. Three very necessary stamps of approval for the deal came in last week. The Department of Justice and the Federal Trade Commission have given the companies the green signal while across the seas, the European Commission has given its nod.  Last month, Nokia Corporation (ADR) (NYSE:NOK) shareholders also ‘okayed’ the deal and NOK and MSFT are all set to sail on new waters.

A Gulliver Amongst other Giants?


These approvals are definitely a milestone for MSFT and it’s clear as day that the company is acquiescing to 2 key truths. The first is that if it has to make an imprint in the smartphone market, it will have to create a top-notch Microsoft phone. The second is that there is no way that it can allow either Apple Inc (NASDAQ:AAPL) or Google Inc (NASDAQ:GOOG) to preclude the smartphone landscape by being the Gulliver of hardware and software innovation in this space.

Adept at Selling-Off Debt


While the approval scene was unfurling onstage, Microsoft Corporation (NASDAQ:MSFT) sold off $8B worth of debt, which in most probability will be channelized towards the Nokia Corporation (ADR) (NYSE:NOK) acquisition. The company announced that the proceeds will go towards acquisitions, general corporate purposes as well refinancing of its existing debt. It has $2B worth of debt that will be due in the summer of 2014. In effect, it is refinancing some of the paper at considerably lower rates.

The Fragments that Matter


Once the deal reaches fruition, what Nokia Corporation (ADR) (NYSE:NOK) will be left with is the NSN network infrastructure business, the HERE mapping service, its licensing division and its patent portfolio. The company’s licensing division which is called Advanced Technologies will be one of the most important segments for the handset maker. Way back in September, Nokia said that it is all set to expand its patent portfolio and it also plans on tacking on its front-running technology licensing program.

The Troll takes a Toll


Of course, Microsoft Corporation (NASDAQ:MSFT) will do the classic grab on Nokia’s devices, but the Finnish giant will retain its hold on its patents which will be licensed out to MSFT. Joaquin Almunia, who holds the reins of overseeing competition for the EU made some scalding comments, saying that Nokia will have to be careful that it does not behave like a patent troll. Euphemistically, I would like to say that the company should be wary of turning into a patent assertion entity.

And so, the company might just have to pare down its planned patent ambitions and approach them with a little less gusto that it had initially planned. Nokia investors have been hoping to see the smartphone maker metamorphose into a patent litigation powerhouse and those expectations might just have to be kept on leash.

The Tax Axe


In the wake of the Nokia, Microsoft deal came the froth and foam of a massive tax dispute in India. The Indian government spread the ice on Nokia Corporation (ADR) (NYSE:NOK)’s assets in the country until that issue was resolved. In the midst of the storm was caught the company’s Chennai factory with 8,000 employees. Incidentally, this is the company’s largest factory in the world. But that pothole was navigated when on Thursday, the Delhi High Court permitted Nokia Corporation (ADR) (NYSE:NOK) to divest its Chennai factory to Microsoft. Income tax authorities will now melt down the ice on the Finnish phone maker’s assets

Asha to Emerge on Emerging Market Scene


Some tech watchers are expounding that the latter will use the Nokia’s Asha smartphone series to gain footing in emerging markets. Talk is that MSFT might even rebrand the Lumia range and it might end up being a “Surface” current. And so, even as the fog lifts very slowly off the MSFT and NOK deal surface, the rationale of the deal comes into focus. The Windows OS is a definite laggard and without Nokia and its popular Lumia range this OS would have been long buried and forgotten.

Many have likened the Nokia Microsoft deal to the Motorola one. I feel there was a definite possibility that Google Inc (NASDAQ:GOOG)’s arm was wrung when Motorola threatened to drag other Android OEM’s to court for every penny they had. Microsoft was possibly left with no choice as all Nokia had to do was threaten to migrate to Android. All said and done, adding allies adds muscle to an army and a combined MSFT and NOK will now be a force to reckon with, even for mammoths like Apple Inc (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG).

And so, is a merged Windows Phone and Windows RT OS on the horizon? It might be. And even as the new wave of Windows releases, dubbed “Threshold,” are all set to hit the market in 2015, the Nokia Corporation (ADR) (NYSE:NOK) angle will prove to be a harbinger of brighter skies.



Priti Desai  is an astute business writer who has been writing about stocks and business long enough to know that the best way to be in sync with the market is to sink oneself into its volatility and irrationality. She feels that understanding business ebbs and tides is about being able to see the flip-side. Every word she writes exemplifies her expertise and knowledge. Money is what makes the world spin while business is what adds momentum to it. Zeroing-in on an exclusive and sui-generis view is about panning the finance landscape and getting a 360° view. Connect with her on pdes17@gmail.com

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