Microsoft falls on concerns about Nokia dealSeptember 3, 2013 @ 8:39 am
NEW YORK (AP) - Microsoft's stock declined Tuesday, as several industry analysts questioned if the company's $7.2 billion acquisition of Nokia's cellphone business is a smart move.
The Redmond, Wash., has been racing to catch up with demand for smartphones and tablet computers. The shift to mobile computing from traditional PCs has weakened Microsoft while empowering Apple, which makes the iPhone and iPad, and Google, 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. It plans to pay $5 billion for the Nokia division that makes mobile phones, including its line of Lumia smartphones that run Windows Phone software. Another $2.2 billion will be paid for a 10-year license to use Nokia's patents, with the option to extend it indefinitely.
"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."
Buying Nokia's phone business makes it unlikely that Microsoft would separate its struggling consumer business from its successful enterprise business, said Walter Pritchard of Citi Investment Research. Some investors and analysts had speculated that Microsoft might do that, he said in a client note.
The analyst also believes the Nokia acquisition may temper the optimism that investors had about a new Microsoft CEO shaking up the company. Investors could conclude that buying the Nokia unit locks Steven Ballmer's successor into the current strategy at the business, Pritchard said. Ballmer announced less than two weeks ago that he will step down from the CEO post within the next year.
Monday's announcement has fueled speculation that Nokia CEO Stephen Elop, who left Microsoft in 2010, will emerge as a top candidate to succeed Ballmer. He will rejoin Microsoft as executive vice president of Nokia devices and services once the acquisition closes.
Microsoft Corp. hopes to close on the deal early next year.
A representative for Microsoft did not immediately respond to an email seeking comment.
Shares of Microsoft fell $2.02, or 6.1 percent, to $31.38 in late morning trading. Shares had gained 25 percent this year.
Nokia's U.S.-traded stock soared $1.32, or 34 percent, to $5.22. The shares hit $5.58 earlier in the session, their highest level since February 2012.
(Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)
Seattle fans are outraged by a new commercial featuring 49ers' Colin Kaepernick
SDOT says human error is to blame for West Seattle Bridge de-icing crashes
The Holiday Map
Find Santa photos, tree farms, lights & seasonal events with our holiday map
Please login below with your Facebook, Twitter, Google+ or Disqus account. Existing MyNorthwest account holders will need to create a new Disqus account or use one of the social logins provided below. Thank you.