Microsoft to acquire Nokia
Microsoft’s announcement of its intent to acquire Nokia this Labor Day was top news for investors. Nokia shares increased by more than 50 percent before settling closer to a 30 percent increase by market close on Tuesday as investors reacted to the news and scrambled to get in on the action.
Microsoft has offered to purchase Nokia’s handset division for $7.2 billion with $5 billion going directly to the Devices & Services unit and $2.2 billion going towards patent licensing. Pending approval by shareholders, the deal is estimated to close during the first quarter of 2014.
Executives at both companies regard the proposed Microsoft/Nokia combination as game changer. “We dreamed of putting a computer on every desk, and a mobile phone in every pocket, and we’ve come a long way toward realizing those dreams. Today marks a moment of reinvention,” said Steve Ballmer and Stephen Elop, CEO of Microsoft and previous CEO of Nokia, respectively.
Moving the corporate chess pieces
Ballmer announced last month that he plans to retire from Microsoft within a year leaving many wondering if Elop will eventually take his place as CEO of the company. As part of the deal announcement, Elop stepped down as Nokia CEO and become the chief of Microsoft’s devices and services business. Over the coming year, Microsoft will have to begin the processing of transitioning into both a software and mobile device company and handle the challenge that comes with integrating two enterprise companies.
It is interesting to note that although Nokia stock has risen with the announcement, Microsoft stock is actually down 5 percent since the announcement. Microsoft stock holders may need more convincing that this is a smart move that will make positive returns.
So much change within a short span of time can be difficult to digest and shareholders will be watching these two companies closely in order to determine what to do next with their investments.