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Microsoft gambles with $7.2B Nokia phone deal

Sep. 04, 2013 @ 12:00 AM

HELSINKI -- Microsoft is wagering $7.2 billion on the idea that owning Nokia's phone business will help the software giant grab a bigger slice of the mobile computing market from Apple and Google.

The Windows maker is buying Nokia Corp.'s line-up of smartphones and a portfolio of patents and services. The 5.44 billion euros ($7.2 billion) deal, announced late Monday, marks a major step in the company's push to transform itself from a software maker focused on desktop and laptop computers into a more versatile and nimble company that delivers services on any kind of Internet-connected gadget.

But some analysts questioned whether buying up the mobile business of Nokia, the fading star of the cellphone world, would aid Microsoft.

"Until there are signs that (Microsoft) can innovate and successfully execute in the post-PC era, we expect the stock to languish at current levels," said Janney analysts Yun Kim and Alice Hur. "We do not believe the planned acquisition of (Nokia's) mobile business changes (Microsoft's) strategic positioning in the smartphone market."

Microsoft's shares fell $1.64, or 4.9 percent, to $31.76 in afternoon trading in the U.S. on Tuesday.

Microsoft, based in Redmond, Wash., has been racing to catch up with customers who are increasingly pursuing their digital lives on smartphones and tablet computers rather than traditional PCs. The shift is weakening Microsoft, which has dominated the PC software market for the past 30 years, and empowering Apple Inc., the maker of the trend-setting iPhone and iPad, and Google Inc., which gives away the world's most popular mobile operating system, Android.

Microsoft is now betting it will have a better chance of narrowing the gap with its rivals if it seizes complete control over how mobile devices work with its Windows software.

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