Nokia-Microsoft Deal Gets Delayed

by CXOtoday News Desk    Mar 25, 2014

deal

Nokia’s $7.2 billion handset deal with Microsoft, which was expected to close by the end of March, has been delayed as Asian competition authorities continue to scrutinize the business models of both the companies, according to several media reports. Even since the deal was announced in September, it has been approved by 15 markets on five continents, including the U.S. and European Union. But Nokia said that the closure of its sale of its mobile devices business and certain patent licenses to Microsoft has to be pushed back to April.

[Read: Microsoft-Nokia deal is a marriage of convenience, say analysts]

Authorities in China haven’t yet signed off on the plan, according to people familiar with the closing process told WSJ. These people say that both companies are optimistic about the new timetable. High-profile tax disputes in India also haven’t been factored into the need to delay the closure, the company said in the statement.

Reports suggest that the new timetable could delay Nokia’s planned announcement of a new strategy that will focus on competing in the wireless networks industry. The company is expected to announce strategic changes and a new chief executive in the next few days. Currently, Nokia’s chairman is acting as chief executive. Stephen Elop, who was named Nokia chief in 2010, is moving to Microsoft, where he will head an expanding hardware business and report to Chief Executive Satya Nadella.

Analysts were optimistic about the partnership as they believed it can unload Nokia’s struggling devices business and help them come up with better products and strategies as well as give Microsoft the edge to go ‘mobile’. Nokia’s handset business, which once dominated the global mobile device industry, has slumped amid stiffer competition from Apple, Google, Samsung and other software and hardware companies. However, Nokia became a critical partner for Microsoft following a decision in 2011 to start selling ‘Lumia’ smartphones powered by Windows software.

[Read: Nokia's Sales Further Dips Prior To Microsoft Handover]

Microsoft has said it would use the Nokia deal to build its own line of smartphones which are better able to compete with Samsung’s Galaxy and Apple’s iPhone. In recent months Nokia has launched new supersize smartphones, a tablet, and a Google Android-powered device aimed at emerging markets.

In addition to working to gain approval from competition authorities, Nokia has been struggling to iron out a continuing tax dispute in India. Tax authorities have levied various claims against Nokia, which operates an 8,000-employee factory in Chennai that produces millions of handsets annually. Resolution is needed if Microsoft is to take control of the factory when the transaction closes, says a Reuters report.

“(The delay) is a bad sign. They have been discussing with authorities for quite a while already, and they still need more time,” said Sami Sarkamies, an analyst at Nordea Markets to The Guradian.”The biggest risk is in the upside of their patents. It looks like Nokia will have to make bigger concessions to push the deal through.”