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Will the tie-up create a new mobile behemoth?

’s unexpected bid for the Finnish maker’s handset division has been seen as a way to solve ’s flagging smartphone situation and a boost for ’s lagging mobile strategy. sees the bid aiding its smartphone strategy, which will boost tablet sales and aid PC movement.

expects the global PC market to decline by 9.7% this year as mobile devices continue to explode at the expense of PCs. “The market as a whole is expected to decline through at least 2014, with only single-digit modest growth from 2015 onward, and never regain the peak volumes last seen in 2011.”

“It’s a bold step into the future – a win-win for employees, shareholders and consumers of both companies. Bringing these great teams together will accelerate ’s share and profi ts in phones, and strengthen the overall opportunities for both and our partners across our entire family of devices and services,” says ’s outgoing CEO, .

brings proven capability and talent in critical areas such as hardware design and engineering, supply chain and manufacturing management, and hardware sales, marketing and distribution,” says Ballmer.

makes more than 200 million phones a year, but has fallen out of favour and is now a shadow of its former self after failing to capture the smartphone market the same way it did with feature phones.

As part of the change, will step aside as CEO to become executive VP of devices and services at . “Building on our successful partnership, we can now bring together the best of ’s software engineering with the best of ’s product engineering, award-winning design, and global sales, marketing and manufacturing,” says Elop.

“With this combination of talented people, we have the opportunity to accelerate the current momentum and cutting-edge innovation of both our smart devices and mobile phone products.”

and Windows Phone have less than a 10% market share in nine markets, but the handsets are outselling BlackBerry in 34 markets. This is not surprising as BlackBerry has been battling to keep the top position in the smartphone segment.

The ailing company has also put itself up for sale, but expects to report a huge loss in its next quarterly figures and is desperately cutting back on costs, with plans to axe 4 500 staff.

In the second quarter, BlackBerry expects an operating loss of between $950 million to $995 million as it writes down stock worth between $930 million to $960 million, a situation it says is due to “the increasingly competitive business environment impacting BlackBerry smartphone volumes”.


In a presentation to stakeholders by ’s top team, the group said its purchase of the cellphone maker would accelerate growth and boost its share of the phone market. The software giant says its deal with provides clarity, which will help make the “market” for Windows phone. also said it would accelerate innovation, hinting at new form factors. High-value services, including geospatial, are key, it says.

The software giant sees a family of devices with integrated services that “best empower people and businesses for the activities they value most,” it says in the presentation.

While will continue to support iPhone and Android phones with its services, it says it “cannot risk having Google or Apple foreclose app innovation, integration, distribution or economics”. will also take “additional” steps to promote the app ecosystem for Windows, it says.

Buying gives access to device design and engineering, as well as a globally scaled supply chain. It also gives it an in to key growth markets and improved unit economics.

, which dates its existence back almost 150 years, has seemed to lag in innovation, and is no longer the darling of the mobile world. Overall, it had 14.1% of the mobile market, behind Samsung, as of the end of the second quarter, according to the .

Samsung and Apple are battling it out for the top spot in the smartphone sector, while says its Windows Phone is number three globally. It says the deal will grow the original equipment manufacturer opportunity.

, which sells more than 300 million devices a year, sees success in phones being vital to success in tablets, which will help PCs.

Ballmer is famous for, among other things, dismissing the iPhone out of hand in 2007, saying it would fail to gain market share. He has also been blamed for ’s failure to gain traction in the tablet space despite initially having an edge.

The giant that is anticipates a worldwide smartphone market of 1.7 billion shipments by 2018, and anticipates having 15% of that. This will give it revenue of about $15 billion and break even will happen when smart device units go past 50 million.

However, , MD of , says is making a fundamental mistake if it sees the deal igniting PC sales. He says PCs are suffering at the hands of tablets.

is innovative, adds Goldstuck, although it has yet to really capture the attention of the market at the top end. He says its mid to low tier products are doing well, but this is not where the margin is.

While is innovating at the top-end, this has yet to translate into sales, says Goldstuck. He says is a long-term player and will trend upwards as it started off a low base, and the company was waiting for the market to understand its vision; unlike BlackBerry, which was waiting for a white knight.

Innovation is coming, what is needed now is for to leverage it, says Goldstuck. He says has deep pockets and should pump money into marketing to compete with Samsung.

In February 2011, and signed a strategic partnership under which would only make Windows phones. That November, it shipped its first handset under the deal, the Lumia 800.

This was followed a year later with the launch of the Windows Phone 8 launch and, in April 2013, the Lumia 520, which shipped at an entry-level price point. In July this year, what calls the “best camera phone in the world,” the Lumia 1020 shipped.

Goldstuck says the 520 must be watched as it is a sub-R2 000 smartphone and is cleaning up the market left by BlackBerry’s Curve.


The deal will add to ’s earnings per share – measured as non-generally accepted accounting principles (GAAP) – by the 2015 financial year, and to GAAP earnings per share the following year. expects to book annual cost synergies of $600 million within 18 months of wrapping the deal up, with competition approval expected early next year.

Stephen Elop, <a href=Stephen Elop, <a href=

Nokia" src="http://www.iweek.co.za/images/stories/2010/Oct2013/steph_elop.jpg" />’s latest quarterly results show revenue of almost $20 billion for the three months to June, while net income was $4.97 billion, despite a $900 million charge after it wrote down Surface stock.

, however, has seen better times. In its latest quarterly results, it said handset units fell 27% in the second quarter. The group, in the midst of a turnaround, saw some margin improvements quarter-on-quarter.

It said net sales fell 24% year-on-year and 3% quarter-on-quarter to €5.7 billion. generated negative cash from operations, losing €196 million compared to a gain of €102 million in the previous quarter.

For , the deal is expected to significantly add to earnings, strengthen its financial position, and provide a solid basis for future investment in its three continuing businesses.


Of the total sale value, €1.65 billion relates to patents that will be transferred in the deal. , owner of digital communications agency Retroviral says this points to the fact that the patents are almost more valuable than the hardware.

As part of the deal with , the software company agreed to make €1.5 billion in financing to , which is currently listed as junk by credit rating agencies, through three tranches of bonds.

Around 3 200 staff will move to as it gets the bulk of ’s devices and services business, its design team and production facilities; as well as operations that generated €14.9 billion, or half, of ’s total sales for 2012.

Under the agreement, will get ’s phone business as well as its Qualcomm and other “key” intellectual property licences, including more than 8 500 design patents. It will license ’s patents for use across all its products and has a ten-year licence to use the brand on feature phones.

’s portfolio has about 30 000 utility patents and patent applications, which considers to be “one of the two most valuable portfolios relevant to wireless connectivity”. is also assigning its existing licence with Qualcomm, the other valuable patent portfolio company, to .

In addition, is conveying rights under its agreements with , Motorola Mobility and Motorola Solutions to , giving the software company the benefit of attractive royalty arrangements negotiated by .

notes that, unless managed creatively, patent royalties can add more than 10% to cost of smartphone materials.

will also be able to broadly use ’s Here in its products, and is left with its map unit, Here, Siemens Networks and Advanced Technologies. Goldstuck notes the deal is a serious hardware move for and could be what it needs to solve its mobile dilemma. In a way, the agreement could be ’s answer to Google and Apple, both of which have their own brands, comments Goldstuck.

analyst thinks can “do it” although it will not be easy to topple Apple and Samsung off the pedestal “that is hundreds of rungs up the ladder”.


Naryshkine says, while may have lost dominance over the past five years, it still sold 53.7 million phones in the last quarter. However, he notes it is not about numbers, but profitability. “ used to chop down trees and produce paper; this is probably just another chapter.”

In ’s second fiscal quarter, it sold 7.4 million smartphones, a 27% year-on-year drop. Its mobile phone sales, at 53.7 million units, also fell 27% from the same period in 2012.

In February 2011, migrated operating systems from Symbian to Windows Phone.

In the second quarter of this year, according to the , the Windows Phone OS posted the largest year-over-year increase among the top five smartphone platforms and reinforced its position as the number three smartphone operating system.

“Driving this result was , which released two new smartphones and grew its presence at multiple mobile operators. But beyond , Windows Phone remained a secondary option for other vendors, many of which have concentrated on Android,” says .

’s low- and mid-end phones have provided it with a powerful business, but the group has not made it at the top end, where the profit is, says , MD of .

, chairman, and now interim CEO, says the deal is “an important moment of reinvention and, from a position of financial strength, we can build our next chapter”.

expects to “book” a gain of €3.2 billion; adding to its earnings. After the sell-off, it will focus on NSN ( Siemens Networks, which it has owned outright since August); Here and Advanced Technologies, which is in the technology development and licensing space. It will keep its headquarters in Finland and will have staff of around 24 000.

Goldstuck says NSN is the jewel in its crown and is highly profitable. ’s board is evaluating strategies between its three remaining businesses, including possible synergies.

“Today is an important moment of change and reinvention for and its employees,” says Siilasmaa. “With our strong corporate identity, leading assets and talent, and from a position of renewed financial strength, we will build ’s next chapter.”

also expects to gain financially from the deal, boosting its net cash reserves from the €4.1 billion it ended the second quarter with, to €7.8 billion; assuming the agreement had been wrapped up during the quarter. Sharman notes the deal is a solution to ’s pending cash issues, although it is a little late.

Naryshkine points out that is a shadow of its former self. “The stock is down 84% in five years as the company lost handset dominance to a wave of newer smartphones that left the Finnish company… well, finished?”