News Topic: NOKIA
In January 2011, Stephen Elop had just assumed the role of Nokia CEO for only four months when he told employees that Nokia was a burning platform. A year and a half later, Nokia was still in a difficult situation. The new Lumia phones did not succeed in turning around sales. Over the past five years, Nokia's stock price has plummeted by 90%. Among the three major rating agencies, two have already rated its debt as 'junk' level.
Nokia is Microsoft's entry point into the smartphone market. From this perspective, perhaps Elop should request help from his former employer to assist the company in getting out of trouble.
Seeking help from Microsoft
Some analysts believe that a large part of Nokia's performance slump is due to its slow response to Apple's challenge. In 2007, Apple reshaped the smartphone market with the iPhone. Some people believe that cooperating with Microsoft might be Nokia's only chance for revival.
From Microsoft's perspective, cooperating with Nokia also has profound significance. After ten years of huge investments, Nokia has become an important partner for Microsoft's entry into the smartphone market. Some companies either use their own operating system, following Apple's model, or use Android software. Sami Sarkamies, an analyst at Nordea Bank in Sweden, believes: 'For Nokia to get out of financial difficulties, it needs strong support from Microsoft.'
According to current agreements, Microsoft will provide Nokia with $1 billion in funding annually to allow Lumia smartphones to use its software. Some insiders said that if Nokia's problems continue to worsen, the support would be even greater.
A senior banker said: 'In my opinion, Microsoft will not acquire Nokia, but it will definitely increase its support, possibly funding $2 billion per year.' Another banker said that Microsoft's support for Nokia would most likely be in the form of corporate loans or equity purchase, but it would not take full control of Nokia.
Microsoft has $60 billion in cash, but historically, it has always avoided the hardware business because it does not want to compete with its own software manufacturers.
Some bankers say that because of Nokia's close relationship with Microsoft, it is unlikely to become an acquisition target for other phone manufacturers. Currently, Nokia's market value is about $12.2 billion.A banking professional said that Nokia would not become a target for private equity acquisitions because, although its market value has fallen, the amount is still large and the business is unstable, so a takeover could result in losses.
The possibility of a complete acquisition by other companies is low. Divesting assets to obtain necessary liquidity is also not a viable option.
Asset Sale
Not long ago, there were reports that Nokia was negotiating with relevant parties, attempting to sell its luxury phone brand Vertu. If private equity investor Permira acquired Vertu, Nokia might only receive a few million dollars.
Bankers said that Goldman Sachs advised Nokia to sell the Vertu business but not other Nokia assets. A source said, 'As a general practice, banks would give this kind of advice, but we haven't heard of banks suggesting that Nokia sell other businesses.'
Other Nokia assets could be more attractive, such as intellectual property. Nokia's intellectual property portfolio is among the best in the industry. Last week, Nokia CEO Stephen Elop stated at the shareholders' meeting that he did not intend to sell patents on a large scale, and he also identified the location and mapping business as core assets. There had previously been reports that Nokia would sell this business; Nokia had spent $8.1 billion to acquire Navteq for this business.
Bankers believe that Microsoft might suggest Nokia not to sell patents, as it is concerned about patents falling into the hands of competitors like Google.
From the current situation, the assets Nokia could sell are shares in the Nokia Siemens joint venture. Last year, Nokia Siemens planned to sell shares to private equity companies, but negotiations ultimately failed due to price issues, so the sale still faces obstacles. John Strand, founder and CEO of Danish consulting firm Strand Consult, said, 'Elop was not hired as the boss of a "burning platform," but he ignited the platform.'
Written by Sohu IT
*Content sourced from: cnBeat*
