Microsoft buys Nokia handset business for €5.4bn

Deal delivers Europe's last big handset maker into US ownership and moves Microsoft firmly into device-manufacturing business

Microsoft is to acquire Nokia's mobile phone arm in a swansong deal for the software giant's long-serving chief executive, Steve Ballmer, delivering Europe's last big handset maker into American ownership.

For €5.44bn (£4.6bn), Nokia is casting off the business that once represented Finland's most important export, in a deal that will result in 32,000 staff transferring to Microsoft.

Overtaken in the smartphone arena by Apple and Samsung, Nokia's board agreed to end the company's decades-long role as a pioneer and once-dominant player in one of the most revolutionary technologies in modern history.

Nokia's chief executive, Stephen Elop, has stepped down from the company's board, and will transfer with the handset business to Microsoft, where he will become head of the devices division after the transaction's expected completion in the first quarter of 2014.

"Today's announcement is a bold step into the future," said Ballmer. "For Microsoft it is a signature event in our transformation."

The acquisition marks the boldest step yet taken by Microsoft in its recently announced strategy of moving decisively into the device-manufacturing business, so that it can design for the software and hardware of its products. It is a move Ballmer hopes will bring the kind of success currently being enjoyed by Apple.

In a dramatic month for America's most successful consumer software group, Ballmer announced his retirement from the company within 12 months after 13 years at the helm. Elop, already tipped as a potential successor, is now seen as the most likely heir to the company still chaired by its founder, Bill Gates. "Elop becomes a really strong candidate for the CEO role," said Roberta Cozza, a research director at Gartner. "He is someone who has demonstrated that he can run a software unit at Microsoft and has his tenure as the CEO of a hardware company."

"I feel sadness because we are changing Nokia and what it stands for," said Elop, at an emotional press conference at Nokia headquarters in Espoo. "We are a challenger and as the news ripples around the world today we will be recognised as an even greater challenger to our competitors."

Nokia has staked a claim to a growing but small share of the smartphone market, with 7.4m of its Lumia handsets shipped in the most recent quarter. Samsung shipped 71m smartphones in the second quarter, according to Gartner, and Nokia is no longer among the global top five.

"I share the frustration that comes from being so far behind two very large competitors," said Elop. "We are going faster than Nokia has ever done before. Achieving our goal of becoming the third ecosystem is becoming very real."

Elop, who formerly headed Microsoft's business services unit, intertwined Nokia's fortunes with Microsoft two years ago when he announced he would abandon the Finnish company's attempts at creating its own smartphone software, opting instead for the Windows Phone operating system.

Microsoft heavily subsidised Nokia's strategy, providing hundreds of millions in marketing dollars per quarter to support the significant advertising spend needed to tempt customers unfamiliar with the Windows Phone interface.

As head of Microsoft's devices unit, Elop will oversee not only phones but its best selling Xbox games console and its Surface tablet computer, which has so far failed to register with consumers. Julie Larson-Green, who currently heads devices and studios at Microsoft and had been seen as a contender for the top job, will report to Elop.

Risto Siilasmaa, Nokia's chairman, will take over as chief executive of the company in the interim. "This transaction makes all the sense rationally but emotionally it is complicated," he admitted, saying the decision was made because Nokia needed more cash if it was to compete with larger smartphone rivals.

The market, he said, "is becoming a duopoly with the leaders building significant momentum with a scale not seen before, while many established players have disappeared or faced difficult choices".

Microsoft will retain its mobiles research and development facility in Finland, where 4,700 Nokia staff are currently employed, and Ballmer said: "We have no significant plans to shift around the world where work is done. We are deeply committed to Finland."

The US company said it would build a datacentre in Finland to serve customers in Europe.

Microsoft is also providing €1.5bn of "immediate financing" to Nokia, implying that the Finnish company has hit a cash crunch. Its debt has already been reduced to "junk" status. If used, the loan will be repayable when the deal closes.

The remaining part of Nokia will be dominated by Nokia Siemens Networks (NSN), which builds mobile phone infrastructure and a mapping platform called Here. Elop recently completed the acquisition of 50% of NSN that was owned by Siemens. These rump assets currently employ 56,000 people and have revenues of €15bn.

But even inside cash-rich Microsoft, Nokia's phone business faces serious challenges. Its handset business has slumped in size from a peak in the third quarter of 2010, with revenues of €7.2bn, to just €2.72bn in the second quarter of this year, its smallest size in more than a decade. It has also been loss-making for five of the past six quarters.

While it is strong in the "feature phone" business in the developing world, it has struggled in the all-important smartphone business. Apple's iPhone and handsets running Google's Android together make up over 95% of sales in the US and China, the world's two largest smartphone markets, according to Kantar Worldpanel's latest figures. Windows Phone only has shares above 10% in Mexico and France, according to the company's figures.

Under the deal, Microsoft is buying the Lumia and Asha brand names that Nokia has used for its smart and intermediate phones. It has licensed the use of the Nokia brand on handsets for 10 years, but the Finnish business will retain ownership of the brand. That will probably mean that the Nokia brand disappearing from handsets in the next decade, ending over 30 years' history in the business.

Having started in 1865 with a pulp mill in the Finnish town of Tampere, Nokia reinvented itself repeatedly, shifting to rubber boot production early in the 20th century, and then making its first telephone exchange in the 1970s. Its first mobile phone appeared in 1981.

Rumours that Microsoft intended to buy Nokia had been floated since Elop joined the company. Reaction to the deal was mixed.

"Microsoft buying Nokia looks like doubling down on the current failing strategy, without changing the dynamics that are preventing success," cautioned Benedict Evans at Enders Analysis.

Ben Wood at CCS Insight described the deal as a "bold, but entirely necessary gamble by Microsoft".

"Mobile needs to be a cornerstone of Microsoft's business for future success," said Wood.

"This is by no means a silver-bullet solution to Nokia and Microsoft's current difficulties. The massive restructuring that has taken place within Nokia over the last two years offers Microsoft a more stable foundation on which to focus its efforts in mobile, but Windows Phone remains a distant third place in the smartphone race."

Article Source : http://www.guardian.co.uk

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Steve Ballmer heads for retirement, but where now for Microsoft?

The software giant made huge profits under its departing CEO – but it will need to adapt to the era of tablets and smartphones

Steve Ballmer's 13 years at the top of Microsoft began as the new century dawned, but he leaves the world's biggest software company at a crossroads where it must choose between the decades-old desktop market or the 21st-century world of mobiles and tablets.

He hinted in the memo for his abrupt announcement on Friday, and in subsequent interviews, that the timing wasn't his choice. "This is an emotional and difficult thing for me to do," he told staff. Asked if it was a sudden decision in a later interview with ZDNet, he said: "I would say for me, yeah, I've thought about it for a long time, but the timing became more clear to me over the course of the last few months."

Ballmer had come under intense pressure since May, when ValueAct Capital Management bought in to the company, saying it was undervalued – and Ballmer himself was part of the problem.

But the attacks had begun even earlier, starting in earnest in 2011 when the influential investor David Einhorn, of the Greenlight Capital hedge fund, called for him to step down, saying he should "give someone else a chance" and that "his continued presence is the biggest overhang on Microsoft's stock".

Microsoft's shares fell below $40 in June 2000 after the dotcom bust, and since then have not gone above $38 – compared with an all-time peak of $58.72 in December 1999. That has frustrated shareholders and led to activists seeking to force Microsoft to dump unprofitable businesses such as search, and concentrate on its highly profitable Office and Server businesses, rather than consumer-facing ones likeXbox and smartphones.

As ValueAct began to look likely to win a seat on Microsoft's board – from which it could begin a proxy fight to force him out – Ballmer decided to move on, even though the company is still in the midst of a huge upheaval that will rearrange its 97,000 staff from five product-oriented divisions to a "vertical" model, mimicking Apple's, where marketing and design teams work across all products and services.

Key reasons for the heightened pressure on Ballmer were the failure of Windows 8, released last October, to lift PC sales out of a continuing slump, and Microsoft's still-tiny share of the fast-growing smartphone and tablet markets, said Al Hilwa, a director at research company IDC.

"If Windows 8 had buoyed PC sales it would have let out some of the pressure on him to announce his planned departure since the turnaround would be seen as well under way," Hilwa told the Guardian. "Instead, it is clear there is more work to do. To be sure, he is going to be at the helm for some time and so these are still problems for him to tackle."

A key challenge is that Microsoft has failed to find any big-money hits with consumers in the 21st century – leaving it reliant for its gigantic profit flows on Windows licence sales, and renewing licences from businesses.

Now Ballmer's successor will have to decide whether to chase consumers with newer products, or intensify the focus on big business as a source of profit. The slump in consumer PC sales – down 20% over the past year – has not been compensated for by tablet or smartphone sales. Newer businesses are losing money. In the last two years alone, Microsoft has lost almost $3bn on its Bing search engine and other internet projects – not counting a $6bn write-off on the 2007 purchase of online advertising agency aQuantive. Last quarter it took a $900m hit on its Surface tablet, which has sold poorly, and only 300,000 of its Surface Pro tablet for business are reckoned to have shipped in the quarter to June – against a world market of 45.1m. Smartphones using its Windows Phone software have only single-digit share in the world market, and only 4.4m out of the 141.8m smartphone users in the US, Microsoft's home market.

There is no chance of Bill Gates returning to the chair, say insiders, because he is focused on his charity work. Instead, potential candidates must know how Microsoft operates – and have the mixture of experience, engineering and vision to lead the company.

Stephen Elop, who left Microsoft's Office division in September 2010 to take over at Finnish phone maker Nokia, is seen as a strong outside candidate because of his earlier experience with the enterprise and consumer markets, as well as the key business of mobile.

Satya Nadella, who looks after the Cloud and Servers businesses, could also be favoured. Qi Lu, an ex-Yahoo engineer leading the Bing search team, is seen as another front runner.

"Taking an internal candidate like Nadella or some of the other people on the Windows team, that makes sense to keep a steady hand through this reorganisation and strategic shift," Norman Young, an analyst at Morningstar, told Reuters. "But a strong case could be made that the company needs a breath of fresh air, someone who can execute on the strategy but also bring an outsider perspective."

Ballmer oversaw a series of errors that have left Microsoft scrambling to catch up with Apple, Google and Amazon. While Apple's success with the iPod was unexpected early in the century, Microsoft's reaction was at first uncoordinated, and then it undercut licencees by launching its Zune music player in autumn 2006. That was Ballmer's idea – but it arrived just as the digital music boom ended and smartphones took over.

Microsoft CEO Steve Ballmer has announced he is to retire
Similarly, in autumn 2009 he personally killed a project devised by Xbox innovator J Allard – a book-like tablet called Courier which could have arrived at the same time the next year as Apple's iPad. Instead, the iPad went into the market unopposed.

In search, Ballmer in 2003 personally vetoed the idea of buying Overture, which owned key technologies relating to search ads – arguing Microsoft could build its own as it began competing head-on with Google that year. Instead, it has lost billions of dollars on its Bing search engine, while Google licensed Overture's patents for its money-spinning AdWords service.

Amazon, thought of as just a retailer, stole a march by offering "cloud" services such as storage and processing, a space it now dominates. Microsoft, reliant on desktop software sales, was slow to pick up on its importance, despite Gates having espoused it in 2001.

Nor is Microsoft out of the woods, even as it readies the launch of an update to Windows 8. PC makers, seeing sales to consumers slump, are wary about Microsoft's entry into the "devices" business with its Surface tablets. A source at one of the PC industry's biggest suppliers said: "So far Microsoft has been co-operating with us, rather than being in direct competition. But they're at an inflection point. They either pull back [from the Surface] or they push deeper. And if they do the latter, then we are in competition."

With PC companies under increasing pressure, – with Dell seeking to go private, and HP seeing single-digit margins from PCs – that could drive them towards other platforms, or to compete fiercely with Microsoft's products.

Hilwa argues however that Ballmer did deliver exactly what the market wanted. "During the period he ran Microsoft, Ballmer is third only to Exxon's Rex Tillerson and GE's Jeff Immelt in the dollar volume of company profits he has delivered," he said. From 2000 to 2012, Microsoft's profits totalled $172,813bn, against $199,393bn at GE and $388,480bn at Exxon."I'm not sure there is someone who can do Steve's [Ballmer's] job 'better'. It's an incredibly difficult job, perhaps intractable," Brad Silverberg, a former senior Windows executive and co-founder of Seattle venture capital firm Ignition Partners, told Reuters. "Perhaps the way the job is defined needs to change, and this is the harbinger of bigger changes to come."

Article Source : http://www.guardian.co.uk

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike and if u want to Setup ur business in United Kingdom then  its not difficult in this modern age for more info visit our site Azure Global and join us also On Facebook