Nokia's shareholders took a major step on Tuesday to reshape the company, voting overwhelmingly in favour of selling the company's handset business to Microsoft for $7.2 billion. The approval represents one of the final steps before Microsoft takes control of the struggling cellphone division, which is expected early next year. But it also leaves many questions about what is in store for Nokia.
"It's been a very challenging period," Risto Siilasmaa, Nokia's chairman and interim chief executive, said in a recent interview. "When I became chairman, I didn't think this was going to be a possibility. There have been a lot of emotions."
The handset unit — which sold 64.6 million phones in the third quarter of 2013 — is still one of the world's largest. But it has increasingly lost out to rivals like Samsung and Apple that now dominate the lucrative smartphone market.
After pioneering mobile phone technology throughout the 1990s, Nokia became the world's largest handset maker with a market value of around $250 billion. It had nearly a 40% share of the global smartphone market as late as 2009, according to Gartner, the research company. But Nokia's market share has quickly dwindled to less than 4% of global smartphone sales, and Samsung is the world's largest phone maker. The company's market value stands at roughly $30 billion, or just 12% of its record high.
"It's a sad moment, but we have to look forward," said Michael Halbherr, who leads Here, Nokia's mapping business, which will remain part of the company. "The type of culture we had at Nokia created success, but it didn't do enough to succeed in the smartphone era."
Nokia still has a few tricks up its sleeve as it contemplates the future. Senior executives at the company are completing a strategy, due early next year, that is expected to focus on Nokia's remaining businesses and be supported, at least in part, by the cash from the handset sale.
The plans are likely to include a networking unit that competes with companies like Ericsson of Sweden and Huawei of China to build high-speed mobile data infrastructure for large carriers, including Verizon Wireless and Vodafone. While the business began as a joint venture with Siemens, Nokia bought the 50% that it did not already own for $2.2 billion earlier this year.
The company has also held on to its mapping division, whose technology is in about 80% of the automotive navigation systems worldwide. It also controls an intellectual property portfolio that could either be licensed to other companies or used to build new products.
"We are in a unique situation," Henry Tirri, Nokia's chief technology officer, who manages the company's intellectual property, said. "Before, we only thought about fitting our technology into mobile devices because that was our main business. Now, we have kept our technological assets and can use them where we see opportunities."
Analysts warn, however, that creating a viable business from the three separate divisions, which are run independently, could prove a challenge. Nokia's networking division, for example, will generate over 90% of the company's revenue after the handset sale is completed. With little overlap with the company's mapping unit, some investors have called on the firm to sell, or spin off, the smaller unit so that it can prioritise its core networking operations.
Other shareholders have demanded that Nokia return some of the almost 8 billion euros, or $10.8 billion, in cash that Nokia will have after it completes the sale of its handset division.
Analysts say that a portion of the proceeds will probably be spent on acquisitions, particularly for Nokia's mobile networking business, but that some of Microsoft's money will be for investors, many who remain unsure of Nokia's future plans. As investors bicker over how the money should be spent, Nokia's employees are still coming to terms with the new-look company.
Analysts and investors have raised concerns about how Nokia will be able to connect with global consumers who still associate the brand with mobile phones. Microsoft has a 10-year licensing deal to use the Nokia brand for some of its own phones.
Rajeev Suri, head of the company's network business, says his priority is now squarely on increasing Nokia's market share in so-called fourth-generation mobile infrastructure, which supplies high-speed cellular connections. The business has been growing as consumers increasingly rely on smartphones and tablets.
Halbherr of Nokia's mapping unit also wants to extend the company's foothold in GPS navigation by building relationships with some of the world's largest automakers.
Janne Lindström joined Nokia's networking unit in the mid-1990s, and has worked in a number of manufacturing jobs alongside his counterparts in the cellphone business at one of the company's plants in northern Finland.
Lindström said he had been hopeful that the company's networking business would help to support the faltering handset unit so that it could remain part of Nokia.
"The announcement with Microsoft took me by surprise," he said. "We are a big family. If the mobile phone business was in trouble, we thought it was our duty to help them until they succeeded again."
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